Football intermediaries, or agents, are again under attack in the news. For some, corrupt behaviour has become endemic in football’s culture. It is always dangerous to scapegoat a whole profession or a group of
people. Many intermediaries are trying their best to lawfully defend the
interests of their clients, but some are not. The key focus should be on
providing an adequate legal and administrative framework to limit the
opportunities for corrupt behaviour in the profession. This is easier said than
done, however. We are dealing with an intrinsically transnationalized business,
often conducted by intermediaries who are not subjected to the disciplinary
power of federations. Sports governing bodies are lacking the police power and
human resources necessary to force the intermediaries to abide by their private
standards. In this context, this blog aims to review a recent case in front of
the regional court of Frankfurt in Germany, which highlights the legal
challenges facing (and leeway available to) national federations when
regulating the profession.
Since April 2015, the FIFA Regulations on Working with Intermediaries (“Intermediaries Regulations”) entered into force. They replaced the 2008 FIFA Players’ Agents Regulation and introduced
dramatic changes to the regulation of players’ agents (for a quick introduction
read our short guide here). Although seeing its
first light on April Fools’ Day, the Intermediaries Regulations are not to be
taken lightly. On the contrary, the new rules constitute a major turning point in the governance of
player and club representation. Furthermore, the question of the compatibility
of the Intermediaries Regulations with EU competition law promptly arose when
the Landgericht Frankfurt am Main (LG)
had to rule on a challenge to the Reglement für
Spielervermittlung (DFB-regulations), the national measure implementing the FIFA Regulations
issued by the German Football Federation (DFB, Deutschen Fußball Bund). In its injunction of 29 April 2015 the LG found
some provisions of the DFB-regulations to be contrary to Article 101 TFEU (see
our earlier blog). This decision was
appealed by both parties to the Oberlandesgericht Frankfurt am Main (OLG), which rendered its ruling on 2
February 2016. This blog aims to analyse the decision of the OLG, while also putting it into its
wider legal and social context.
I.
Back to the future: The Piau
case revived
It is not the first time that the regulation of football
agents/intermediaries by football federations and EU law are colliding. The
previous Piau saga that started on 23
March 1998 with a complaint to the European Commission by a French agent,
Laurent Piau, ended only very recently
in front of the French Courts with a painful defeat for Mr. Piau. In the
framework of that case, the then Court of First Instance of the EC (CFI) issued
a ruling on the compatibility
of the FIFA Agents Regulations with EU competition law, on appeal against the
Commission’s decision to reject the
complaint by Laurent Piau. In that decision, the CFI famously showed its
surprise to see a private association engaging in regulatory activity without
an express delegation of public power. In the words of the Tribunal, “the
rule-making power claimed by a private organisation like FIFA, whose main
statutory purpose is to promote football, is indeed open to question”.[1]
Indeed, “[i]n principle, such regulation, which constitutes policing of an
economic activity and touches on fundamental freedoms, falls within the
competence of the public authorities”.[2]
Yet, as many know, the world of football is special and in practice national
states have very much relinquish regulatory control over it.
The CFI was pragmatic enough to recognize this unusual
state of affairs. In fact, this peculiarity also enabled it to consider that
the FIFA regulations, issued by a private organization, could not escape the
scope of EU competition law.[3]
Yet, in fine, the CFI endorsed the
compatibility of the FIFA regulations with EU Competition law. It considered
first that the European Commission (EC) was right in holding that it obtained the
repeal of the most restrictive provisions contained in the original FIFA regulations.[4]
Furthermore, the CFI supported the EC’s view that the compulsory nature of the
FIFA licensing mechanism could be justified under the framework of then Article
81(3) EC [now 101(3)TFEU]. It stated that the “Commission did not commit a
manifest error of assessment by considering that the restrictions stemming from
the compulsory nature of the licence might benefit from an exemption on the
basis of Article 81(3) EC”.[5]
Finally, the CFI affirmed the applicability of Article 82 EC [now 102 TFEU] to
the FIFA regulations, but concluded that “it follows from the above
considerations regarding the amended regulations and the possible exemption
under Article 81(3) EC that such an abuse [of a dominant position]
has not been established”.[6]
Thus, based on the framework of analysis used in Piau, there is absolutely no doubt that
EU competition law is applicable to the DFB-regulations (and analogically to
all the other national regulations implementing the new FIFA Intermediaries Regulations).[7]
The key question, however, is whether the restrictive effect on competition of
those new rules can be justified. Such a justificatory framework of analysis is
also broadly in line with the CJEU’s case law on competition law and sport, and
in particular its Meca-Medina ruling.[8]
The question of the legitimate objectives and proportionality of the new rules
was rightly identified by the LG and OLG as the defining one to assess
rule-by-rule the legality of the DFB’s regulations.
II.
The OLG Frankfurt and the Compatibility
of the DFB regulations with EU Competition Law
The OLG’s
ruling bears no clear winner or loser, as both parties can claim to have
prevailed on parts of their claims. In its decision the Court clearly outlined
a set of provisions that it deemed compatible with EU law, and another contrary
to it. In any event, this case is again a good reminder that EU law is no golden bullet against the regulations
of the Sports Governing Bodies (SGBs). Instead, their compatibility with EU law
must be assessed on a case-by-case basis, bearing in mind their contexts and
objectives. Nevertheless, EU law can be invoked to challenge the rationality of
the SGBs’ regulations and to check any disproportionate encroachment on the
economic freedom of the affected actors.
A.
The DFB rules incompatible with EU Law
In the present case, the DFB’s regulations for
intermediaries faced a relatively detailed quasi-constitutional control by the OLG. The German court found that parts
of the regulatory options adopted by the German federation are disproportionate
to attain their objectives and therefore contrary to Article 101 TFEU. This is
especially true of the rule forcing intermediaries to abide by the rules and
jurisdictions of the DFB, UEFA and FIFA, and of the rule imposing a duty to
provide an extended certificate of good conduct usually reserved for
professions involving a risk to the integrity of minors.
In line with the decision in first instance, the OLG ruled against the provision
requiring intermediaries to submit to the jurisdictions of FIFA, UEFA, DFB and
its members in connection with all violations of their regulations and statutes
(see point 1 of DFB Vermittlererklärung für natürliche Personen – Anhang 1, and a related notice later issued by the
DFB).[9] In
the OLG’s view, it would result in an
impossible situation for intermediaries, as they would be required to have a
‘reasonable’ knowledge of, at least, 35 different association statutes and face
being subjected to 30 different jurisdictions.[10]
The court puts forward that it is necessary, as a prerequisite for the
submission of non-members to the rules of an association and its jurisdiction,
to be able, at any time to take knowledge, in a reasonable manner, of the
content of the regulations, compliance mechanisms and sanctions. This
possibility was not warranted in the present case. In other words, if the DFB
wishes to subject intermediaries to its jurisdiction it is possible, but it
would need to clearly define what such a submission would entail in terms both
of the rules and procedures that would be applicable. In fact, as recognized by
the European Parliament,[11]
some type of disciplinary control by the national federations over the
intermediaries is necessary to give some teeth to their regulations.
Furthermore, the OLG
also rules that agents cannot be forced to submit an extended certificate of
good conduct (erweiterten
Führungszeugnisses).[12] The
OLG agrees with the appellant that
this duty is impossible to fulfil as under German criminal law, such
certificate can be issued only for occupations suitable to establish/result in
contacts with children and young people. Yet, such a contact with minors is not
at the heart of an intermediary’s profession, especially that, as we will see
below, intermediaries cannot derive any financial compensation for a transfer
or employment contract involving a minor, it seems thus impossible for he or
she to obtain the requisite certificate.[13]
The OLG has
clearly drawn a line in the sand. There is a limit to the obligations the DFB
can impose, they must be rationally possible to fulfil and connected to the
objectives pursued and must not be unreasonably burdensome for the
intermediaries.
B. The DFB rules compatible
with EU Law
The judgment is rather remarkable for what it
considers proportionate regulation by the DFB.
First, it endorses, contrary to the LG,
the proportionality of the ban on intermediary fees for transfers or contracts
involving minors.[14]
This ban was a very controversial part of the new FIFA regulations, as it was
deemed extremely restrictive of the economic freedom of intermediaries and
potentially counter-productive. [15]
However, in the view of the OLG, article
7.7 of the DFB-regulations pursues a legitimate objective: the protection of
minors (der
Minderjährigenschutz).[16]
It aims, more specifically, to prevent the transfer of underage players based solely
on the economic interests of the intermediary and/or that underage players are
taken to Germany without a stable employment perspective.[17]
Moreover, the OLG deems this prohibition
to be necessary as the other legal protections for minors provided by the
German civil code are often inapplicable.[18]
Finally, the court considers this prohibition to be proportionate. First,
because intermediaries are not barred from being remunerated for advising
minors when this advice is not requested in the framework of the conclusion of
an employment contract or a transfer. Furthermore, the OLG notes that similar measures have been adopted in all other
European countries and is supportive of a uniform approach to the regulation of
the role of intermediaries in transfers of minors.[19]
Overall, this is not a surprising assessment. The need to combat human
trafficking and to fight abuses linked to transfers of minors have been repeatedly
emphasised by the European institutions in their soft law.[20]
Recently, the European Parliament underlined ‘the
specific vulnerability of young players and the risk of them becoming victims
of human trafficking’[21]. Only time will tell whether this type of draconian
measure will rein such abuses. In any event, if reducing the economic
incentives of intermediaries linked to transfers of minors will most probably
restrict their economic opportunities, it is also likely to diminish the
connected incentives for human trafficking in football.[22]
Furthermore, the OLG’s
judgment also endorses the transparency requirements imposed by the DFB. More
precisely, it deemed the obligation for clubs and players to disclose the
contract details covering remuneration and payments to intermediaries’
enshrined in article 6.1 DFB-regulations compatible with EU competition law.[23]
The legitimate aim pursued is the transparency and traceability of the market
for intermediaries. Behind this objective, lies the idea that player transfers
should be primarily based on sporting, rather than financial reasons.
Consequently, it deems that an obligation to disclose payments connected to
intermediation is necessarily linked to the attainment of this goal. This duty
to disclose is also considered proportionate. For the OLG, it does not run counter the German data protection rules, nor does
it constitute a disproportionate infringement in the commercial operations of
an intermediary. When balancing the interest of the intermediary to keep the
financial flows secret and the interest of the DFB in unveiling these flows,
the OLG finds that transparency aimed
at limiting the external influence of intermediaries on transfers should
prevail.[24] In
the eyes of the court, the DFB has concretely demonstrated that the negotiation
of transfers is linked with important fees (erheblichen
Zahlungen), which are liable to trigger a transfer of a player for economic
reasons, rather than sporting ones. This, the OLG argues, runs counter to the ideal of fair sporting
competitions. [25] In
general, striving for greater transparency/publicity in the intermediary market
is at the heart of the regulatory shift intended by the new FIFA regulations.[26]
In fact, a recent report by two Harvard based scholars argues that the lack of
transparency in the transfer market is one of the main causes for money
laundering and corruption in football.[27]
This is reinforced by the concentration of the market for intermediaries, with
a group of happy few constituting an oligopoly.[28]
Besides, due to the inherently transnational operation of the market, it is
extremely difficult to monitor for national authorities. Intermediaries rely on
complex contractual structures (many of them have been recently exposed on the footballleaks
website), juggling with national laws and arbitration clauses to reduce both
their taxes and regulatory oversight. Though the transparency requirements imposed
by the DFB are extremely limited (a first rough synthesis for 2015 is available
here) and way bolder
proposals must be put on the table,[29]
this is an important step in the right direction. This quest for transparency
and openness around the financial flows involving intermediaries is very much
“applauded” by the European parliament.[30]
In fact, if supporters and citizens, who are often in fine called to financial rescue when an overspending club is
ailing, are expected to exercise a public check over the over-optimistic (and
sometimes corrupt) management of clubs and the correlated extravagant fees paid
to intermediaries, they must be able to rely on trustful data to conduct such a
critical assessment.
Finally, and this is most interesting in light of the on-going legal
battle over FIFA’s third-party ownership ban, the OLG, confirming the LG’s
assessment, also recognized the legitimacy of the DFB’s ban on an intermediary
having an interest in future transfer compensations.[31]
Its legitimate purpose is to rein the disproportionate influence, based on
personal financial incentives, of intermediaries on a player’s transfers.[32]
The OLG seems to follow the LG’s view that the potentiality of
obtaining a share of future transfer fees constitutes a major incentive for intermediaries
to actively encourage an early termination of a player’s contract.[33]
In short, the German court endorses the need to limit incentives for intermediaries
to trigger contractual ruptures over their personal financial interest in a
future transfer of a player. A similar logic could be applied to the
proportionality assessment of the TPO ban. Indeed, this ban is also aimed at
avoiding that transfers be triggered for purely financial reasons. The idea
being that a club should not be in a position of dependence vis-à-vis a third-party (in practice
often an intermediary) that would force it to transfer a player to satisfy its
own purely economic rationale. In this regard, the OLG’s judgment is very encouraging for FIFA as it supports a logic
of ‘de-financiarization’ of football. The court is very much recognizing that
economic incentives should not be front-and-centre in contemporary football and
that the fact that there is a clear economic dimension to sport (triggering for
example the application of EU law and/or labour law) should not overshadow its other
dimensions (cultural, social, ethical, educational). Conciliation is necessary,
players are not amateurs anymore, transfers are possible, TV rights money can
trickle down, but the rampant financiarization (and collateralization) of
labour contracts seems both dangerous in terms of the economic instability it
might trigger (think FC Twente) and of the unethical
abuses it might incite and conceal.
Conclusion: The legal
consequences of FIFA’s retreat
The new FIFA Regulations for Intermediaries are first
and foremost a confession of impotence from the part of FIFA. Fifteen years
after introducing a worldwide regulatory mechanism applicable to football agents,
FIFA basically acknowledged its incapacity to control the profession and rein
its negative externalities. The old licensing system proved unable to provide a
qualitative level playing field for agents, nor was FIFA capable (or willing to
invest enough resources) to truly enforce its rules. In fact, at the local level,
a multitude of informal agents and practices had practically hollowed out the FIFA
Regulations.[34] Yet,
instead of strengthening its regulatory apparatus and enforcement mechanisms,
FIFA decided to retreat and basically handed over the responsibility to
regulate intermediaries to the multitude of national federations. One can be
excused for doubting at first that such a re-nationalization is well suited to
control an inherently transnational market.[35]
Yet, there is still some room left for hope.
The re-nationalization of the Regulations will
undoubtedly bring about a complex regulatory landscape with different regimes
applicable in each national jurisdiction.[36]
Moreover, agents/intermediaries might face an enhanced amount of red tape and
administrative fees if they aim at entering each and every national market.
These negative consequences can be tempered, however, by a number of things.
First of all, the market for intermediaries has never been truly transnational.
Sociologists have shown that it operates more as a chain of national actors
rather than with truly transnational players.[37]
Furthermore, the big transfer money (and thus intermediary money) in football
is concentrated on a small number of national markets (mainly the European big
five[38]).
This means that if those markets jointly engage in a strict regulation of
intermediaries it will affect disproportionately (probably positively) the
profession. Due to massive TV rights revenues these national federations and
leagues also dispose of the necessary (financial and administrative) resources
to rigorously enforce their rules. For example, if at a European level,
national federations were able to coordinate their new intermediaries
regulations and provide a level regulatory field for the profession, which
would involve both reducing the administrative costs to exercise it and a sharper
control of its negative externalities, FIFA’s regulatory retreat would be largely
compensated by a potentially more effective regulatory system.
What is the role of EU law in this regard? The Piau case is a good reminder that the
CJEU is sympathetic to the need to regulate the market for intermediaries.
Since then, the soft law of the European institutions (and especially the
European Parliament’s position) has very much comforted this sympathy.[39]
However, it would be rather naïve to believe that the EU would be able and
willing to take on the task of single-handedly re-regulating such a complex transnational
field. It has currently other burning priorities and crucially lacks the resources
and expertise to do so. The role of EU law is rather one of a careful catalyst
and counter-power, aimed at encouraging private regulations at the national or
transnational level and eschewing that they go too far in scapegoating the
intermediaries and in restricting their economic freedoms. In this regard, the
OLG Frankfurt provided, on the basis of EU law, a rather balanced review of the
DFB regulations, striking down some of the more intrusive (or arguably less
rational) parts of the regulations, while recognizing the legitimacy and
proportionality of others. EU law can be invoked to open up a critical
discussion over the regulatory trade-offs of transnational private regulations. Not more but also not less.