Editor’s note: Stefano Bastianon is Associate Professor in EU Law and EU sports law at the University of Bergamo and lawyer admitted to the Busto Arsizio bar. He is also member of the IV^th Division of the High Court of Sport Justice (Collegio di Garanzia dello sport) at the National Olympic Committee.

1. On the 20^th July 2018, the Court of Arbitration for Sport (hereinafter referred to as “CAS”) issued its decision in the arbitration procedure between AC Milan and UEFA. The subject matter of this arbitration procedure was the appeal filed by AC Milan against the decision of the Adjudicatory Chamber of the UEFA Financial Control Body dated 19^th June 2018 (hereinafter referred to as “the contested decision”). As many likely know, the CAS has acknowledged that, although AC Milan was in breach of the break-even requirement, the related exclusion of the club from the UEFA Europe League was not proportionate. To date, it is the first time the CAS clearly ruled that the sanction of exclusion from UEFA club competitions for a breach of the break-even requirement was not proportionate. For this reason the CAS award represents a good opportunity to reflect on the proportionality test under Art. 101 TFEU and the relationship between the landmark ruling of the European Court of Justice (hereinafter referred to as “ECJ”) in the Meca Medina and Majcen affair and the very recent case-law of the CAS.

2. According to the contested decision, AC Milan was guilty for failing to comply with Articles 58 to 63 of the UEFA Financial fair-play regulations on the break-even requirement. As a consequence the Adjudicatory Chamber has excluded AC Milan from participating in the next UEFA Europe League for which AC Milan has already qualified (2018-2019) at the end of the 2017-2018 Italian football championship. The appeal filed at the CAS by AC Milan was mainly aimed at seeking the annulment of the contested decision and ordering UEFA to enter into a settlement agreement.

3. The theory of proportionality test under Art. 101(1) TFEU in sports matters goes back to the ECJ’s ruling in the 2006 Meca Medina and Majcen case, while, in general terms, this theory was enunciated by the ECJ for the first time in the 1994 DLG case and then repeated in the 2002 Wouters and Others case although in a slightly different way.

In the DLG case the ECJ has ruled that:

«in order to escape the prohibition laid down in Article 85(1) of the Treaty, the restrictions imposed on members by the statutes of cooperative purchasing associations must be limited to what is necessary to ensure that the cooperative functions properly and maintains its contractual power in relation to producers (…). In addition, it is necessary to establish whether the penalties for non-compliance with the statutes are disproportionate to the objective they pursue and whether the minimum period of membership is unreasonable». 

Eight years later, in the Wouters and Others case the ECJ established the following principles:

(i) not every agreement between undertakings or every decision of an association of undertakings which restricts the freedom of action of the parties or of one of them necessarily falls within the prohibition laid down in Art. 101(1) of the Treaty;

(ii) for the purposes of application of that provision to a particular case, account must first of all be taken of the overall context in which the decision of the association of undertakings was taken or produces its effects; and

(iii) it has then to be considered whether the consequential effects restrictive of competition are inherent in the pursuit of those objectives.

Unlike the DLG case, in the Wouters and Others ruling the ECJ did not expressly refer to the concept of proportionality, but preferred to recall the concept of inherent restrictions. However, from the overall wording of the ECJ, it is clear that in both cases it tried to apply in the antitrust sector the same theory of mandatory requirements developed in relation to the internal market.

4. On the contrary, in the Meca Medina and Majcen case, the ECJ expressly referred to the concept of proportionality. In particular, the ECJ has literally quoted the passage of the Wouters and Others ruling where it is stated that:

«not every agreement between undertakings or every decision of an association of undertakings which restricts the freedom of action of the parties or of one of them necessarily falls within the prohibition laid down in Article 81(1) EC. For the purposes of application of that provision to a particular case, account must first of all be taken of the overall context in which the decision of the association of undertakings was taken or produces its effects and, more specifically, of its objectives. It has then to be considered whether the consequential effects restrictive of competition are inherent in the pursuit of those objectives (Wouters and Others, par. 97)». 

However, unlike the Wouters and Others case, the ECJ has added that the effects restrictive of competition must also be proportionate to the objectives pursued.

More specifically, in anti-doping issues the test of proportionality is a means to avoid the risk that a given rule (and the sanctions imposed in case of a breach of it) may prove excessive by virtue of:

(i) firstly, the conditions laid down for establishing the dividing line between circumstances which amount to doping in respect of which penalties may be imposed and those which do not, and

(ii) secondly, the severity of those penalties (in the case at issue the penalty was a two year suspension).

Regarding the first point, the ECJ has underlined that the dividing line was determined by the threshold of 2 ng/ml of urine above which the presence of Nandrolone in an athlete's body constitutes doping. Based on documents before the Court, the ECJ could conclude that the average endogenous production observed in all studies then published was 20 times lower than 2ng/ml of urine and that the maximum endogenous production value observed was nearly a third lower. As a consequence, the ECJ rejected the argument according to which the threshold was set at such a low level that it should have been regarded as not taking sufficient account of the phenomenon of the endogenous production of Nandrolone.

Regarding the second point, instead, the ECJ simply observed that: 

«since the appellants have, moreover, not pleaded that the penalties which were applicable and were imposed in the present case are excessive, it has not been established that the anti-doping rules at issue are disproportionate».

This is the most critical passage of the ruling as one could wonder what would happen if the plaintiffs had contested the proportionality of the penalties. In such a case the ECJ should have examined the substance of the plea and stated whether the two year suspension was proportionate or not. However, in the event that the ECJ had come to the conclusion that the penalty was not proportionate, the anti-doping rules at issue should have been declared null and void unless it was possible to prove that the conditions of Art. 101 (3) TFEU were fulfilled.

The same reasoning was applied by the EU Commission in the ISU decision concerning the Eligibility rules enacted by the International Skating Union. In its decision, the Commission clearly underlined that:

«even if the Eligibility rules and their consequential effects restrictive of competition were inherent in the pursuit of any legitimate objective, the sanctions imposed on athletes in case of breach of the Eligibility rules are manifestly disproportionate» (par. 260).[1]

Thus, in sports matters there seem to be no doubt that the proportionality test must involve also the sanctions imposed on athletes. As already said, in the ISU decision, the Commission has clearly underlined that the Eligibility rules were not proportionate to achieve legitimate objectives in particular in view of the disproportionate nature of the ISU’s ineligibility sanctions. More specifically the Commission has pointed out that:

«the 2014 Eligibility rules provided for the heaviest sanction of a lifetime ban, even for the first infringement of the Eligibility rules, without taking into consideration the circumstances of the case (…). For the purposes of the assessment of the proportionality of the Eligibility rules it is however not relevant how many times the ISU has actually imposed sanctions. The fact that a lifetime ban was imposed only once on an athlete may even underline the strong deterrent effect of the sanctions. Although the sanctions system has been modified in the General Regulations 2016, the sanctions remain disproportionately punitive, as they provide for periods of ineligibility that go up to five years for negligent participation in unauthorized events, up to 10 years for athletes that knowingly participate in unauthorised events and a lifetime ban for athletes participating in unauthorised events endangering, inter alia, the ‘ISU jurisdiction’. These are disproportionately heavy sanctions in particular in view of the fact that on average a professional athlete's entire career is around eight years long. Also the imposition of a five-year ban is therefore likely to impact very heavily on an athlete's career who, after years of training and sacrifices, loses the possibility to gain income through the participation in the ISU's international events». 

This reasoning clearly shows that the Commission has considered the sanctions imposed to be disproportionate, not simply the rule forbidding participation in unauthorized events.

5. To date, neither the EU Commission nor the ECJ has had the opportunity to comment on the compatibility of the UEFA Financial Fair-play rules with EU Competition law. Indeed, regarding the Striani affair, the Commission has dismissed the complaint on procedural grounds only (the lack of Community interest), while the ECJ has declared a reference for preliminary ruling send by a Belgian court manifestly inadmissible and therefore did not rule on the substance of the case. As a consequence, to date there is no European formal decision that has assessed the compatibility of UEFA Financial Fair-play rules with EU law.

This opportunity, however, was offered to the CAS in the context of the Galatasaray/UEFA award (2016/A/4492). To fully understand the case one must go back to the 2^nd March 2016 when the Adjudicatory Chamber of the UEFA Financial Control Body issued a decision in which it decided that Galatasaray has failed to comply with the terms of the Settlement Agreement and imposed on Galatasaray an exclusion from participating in the next UEFA Club competition for which it would otherwise qualify in the next two seasons.

On the 11^th March 2016, Galatasaray filed an appeal with the CAS to challenge the decision of the Adjudicatory Chamber of the UEFA Financial Control Body. Basically, the arguments put forward by Galatasaray were based:

(i) on the alleged incompatibility of the break-even rule with EU law (namely, Art. 101 TFEU on cartels, Art. 102 TFEU on abuse of dominant position, Art. 63 TFEU on free movement of capital, Art. 56 TFEU on free movement of services and Art. 45 TFEU on free movement of workers); and, in the event the first argument is rejected,

(ii) on the alleged disproportionate nature of the sanctions imposed by UEFA.

It is very interesting to note that from the point of view of Galatasaray the incompatibility of the break-even rule with EU law is something different and completely divorced from the proportionate character of the sanction. Indeed, the latter argument is invoked only in the event the first argument is rejected. In other words, according to this line of defence, the compatibility of the break-even rule with EU principles must be assessed only on the basis of the alleged restrictive effects on competition and the (alleged legitimate) objectives pursued, without considering the sanctions imposed.

In line with this approach, the CAS examined the two arguments put forward by Galatasaray separately. Regarding the relationship between the break-even rule and EU Competition law, the CAS reasoning can be summarized as follows:

(i) UEFA Financial fair-play regulations have neither the object nor the effect of restricting competition because: (a) UEFA Financial fair-play regulations do not prevent the clubs from competing among themselves on the pitch or in the acquisition of football players; (b) they prevent the distortion of competition by overspending; (c) clubs are free to pay the players as much as the wish provided that salaries are covered by revenues; (d) large dominant clubs have always existed and will always exist and therefore the alleged ossification of the structure market is a nonsense; (d) overspending is not completely prohibited because the break-even rule only applies over rolling periods of three years; and

(ii) in any case, even assuming that the break-even rule has anticompetitive effects, the objectives sought by UEFA Financial fair-play regulations do appear legitimate and their alleged restrictive effects inherent to the achievement of those objective. Put simply: if UEFA intends to control the level of indebtedness of European football clubs, the imposition of limits to spending beyond revenues is a natural element of a financial discipline seeking that objective.

By contrast, regarding the proportionality of the sanction imposed by the UEFA, the reasoning of the CAS is completely based on external factors which allegedly affected the finances of Galatasaray (i.e., the Syrian refugee crisis, the terrorist attacks in Turkey, the Turkish major match-fixing scandal, the exchange rate and rate fluctuations, the national economic downturn in Turkey, the inefficiencies of the market and the management changes). However, according to the CAS, this argument cannot be accepted because the club failed to provide the Panel with the accounting evidence of how and in which proportion each of these factors would have caused the break-even deficit. Moreover, the CAS has underlined that the sanction was not disproportionate because:

(i) it was imposed as a sanction for a second violation (i.e., after the Settlement Agreement which presupposes the previous violation of the rules on financial fair play);

(ii) an exclusion limited in time (one season) from the UEFA competitions is consistent with the principle of equal treatment and fair competition, as it protects the club respecting the UEFA Financial Fair-play regulations and does not prevent future compliance with them.

It follows from the foregoing that, according to the CAS the proportionate character of sanctions listed in the UEFA Financial Fair-play regulations cannot affect the evaluation of the legitimacy of these regulations under Art. 101 TFUE.

6. To some extent the AC Milan/UEFA case is similar to the Galatasaray case. Both clubs have failed to comply with the break-even requirement; both clubs have been sanctioned with the exclusion for one season from the UEFA competitions; both clubs have contested the proportionality of the sanction. Unlike Galatasaray, however, AC Milan was denied the possibility to enter into a Settlement Agreement[2]. On the contrary, it is worthy to note that the CAS has confirmed the decision of the Adjudicatory Chamber of the UEFA CFCB, which was rendered on the 19^th June 2018, establishing that AC Milan had failed to fulfil the break-even requirement. However, it has annulled the decision to the extent that it has excluded AC Milan from participating in the next UEFA Club competition for which it would otherwise qualify in the next two seasons (i.e., the 2018-19 and 2019-20 seasons), arguing that the sanction was not proportionate. As a consequence, the CAS has referred back the case to the Adjudicatory Chamber to issue a proportionate disciplinary measure. The press release issued on the 20^th July 2018 (the full text of the award is not yet available) indicates that the decision to annul the sanction and refer back the case to the Adjudicatory Chamber is based on the following arguments:

(i) some important elements regarding the financial situation of the Club and the recent change in the Club’s ownership have not been properly assessed by the Adjudicatory Chamber, or could not be properly assessed at the moment when the contested decision was rendered;

(ii) the Adjudicatory Chamber is in a better position than the CAS Panel to issue a new proportionate disciplinary measure on the basis of the current financial situation of the Club.

Despite the differences between the two cases, it is interesting to note that in the Galatasaray case the CAS assessed the sanction imposed by the Adjudicatory Chamber on the merits and found it proportionate. To the contrary, in the AC Milan case the CAS has assessed the sanction on the merits only to state that it was not proportionate, but refrained from saying which other sanction could be considered proportionate, arguing that the Adjudicatory Chamber is in a better position than the CAS to issue a new proportionate disciplinary measure. In other words, the CAS seems to say that it has no problem to assess the proportionality of a given sanction ; however, if it deems that the sanction is not proportionate, it is not for the CAS to replace the penalty imposed with another sanction.

7. Comparing the awards in the Galatasaray and AC Milan cases with the ruling in Meca Medina and Majcen affair some aspects deserve to be underlined. First of all, according to the case-law of the ECJ in sports matters, the evaluation of the restrictive effects of a rule necessarily presupposes the analysis of the proportionate character of the sanction imposed in the event of violation of that rule. On the contrary, according to the case-law of the CAS the analysis of the proportionate character of a sanction necessarily presupposes a positive evaluation of the legitimate character of the objectives pursued by the rule and its inherence to those objectives. In other words, it seems that according to the CAS the disproportionate nature of a sanction is not capable of affecting the legitimacy of the rule whose violation determined that sanction. Although the full text of the award is not yet available from the AC Milan/UEFA case it emerges that the disproportionate nature of the penalty imposed only resulted in the referral of the case to the Adjudicatory Chamber for the imposition of another sanction. Although apparently in line with the Wouters and Others case, this approach is clearly in contrast with the Meca Medina and Majcen case and, more generally, with the whole theory of mandatory requirements in the field of the internal market.

To this regard it is of paramount importance not to underestimate the fundamental difference between rules which are applied a priori and rules that are applied a posteriori. As also recognized by the CAS in the well-known ENIC case:

«rules that are applied a priori tend to prevent undesirable situations which might prove difficult or useless to deal with afterwards, rather than imposing a penalty on someone guilty of something. On the other hand, rules that are applied a posteriori are bound to react to specific behaviours. For example, under EC law and several national laws, rules on mergers are applied a priori, whereas rules on abuses of dominant position are applied a posteriori. Merger operations are checked before they actually take place, and are blocked if the outcome of the merger would be the establishment of a dominant position because of the possible negative consequences on the market and not because the individuals owning or managing the merging undertakings are particularly untrustworthy and the company after the merger is expected to abuse of its dominant position (…). All such a priori rules are applied on a preventive basis, with no appraisal of any specific wrongdoing and no moral judgement on the individuals or companies concerned. On the other hand, rules setting forth obligations and corresponding penalties or sanctions, such as criminal or disciplinary rules, can be applied only after someone has been found guilty of having violated an obligation». 

In this context it is clear that rules applied a posteriori (such as the UEFA Financial Fair-play regulations) consist of both the obligations set forth and the corresponding sanctions. In addition, it is not possible nor correct to arbitrarily separate the obligation from the sanction. Indeed, the fact that in the Meca Medina and Majcen ruling the proportionality test was referred precisely to the restrictive effects and not to the prohibition of doping cannot be ignored. The prohibition of doping as such, without the corresponding sanctions, does not have any restrictive effect on competition.

Secondly, the sanctioning system envisaged by the UEFA does not provide clear and transparent criteria as to how the sanctions are to be applied. There is no scale to measure and define the seriousness of the violation and no provision illustrating the relationship between the violation and the sanction that can be imposed. It is interesting to note that the same reasoning was applied by the EU Commission in the ISU decision. And everyone knows the outcome of this case.

Thirdly, the choice of the CAS to refer back the case to the Adjudicatory Chamber could mean that the AC Milan/UEFA case is not yet closed definitively. According to Art 29 of the Procedural rules governing the UEFA Club Financial Control Body in case of a breach of the UEFA Financial Fair-play regulations the clubs may be sanctioned with the following measures: a) warning, b) reprimand, c) fine, d) deduction of points, e) withholding of revenues from a UEFA competition, f) prohibition on registering new players in UEFA competitions, g) restriction on the number of players that a club may register for participation in UEFA competitions, including a financial limit on the overall aggregate cost of the employee benefits expenses of players registered on the A-list for the purposes of UEFA club competitions, h) disqualification from competitions in progress and/or exclusion from future competitions, i) withdrawal of a title or award. If the exclusion from UEFA competitions is certainly one of the most serious sanctions, there are other particularly serious penalties, such as the prohibition on registering new players in UEFA competitions or the restriction on the number of players that a club may register for participation in UEFA competitions. Consequently, since the seriousness of the ascertained infringement seems to exclude that the Adjudicatory Chamber may decide to apply a very minimal sanction (such as a warning or a reprimand), it cannot be excluded that the new sanction will also be perceived as excessive and therefore disproportionate. And in this case, at least in theory, nothing could prevent AC Milan from appealing to the CAS by challenging again the disproportionate character of the (new) sanction.

8. The Meca Medina and Majcen ruling presents many ambiguities and for this reason is rightly criticized. To say nothing else, it cannot be ignored that the extension of the proportionality test also to the sanctioning system provided for by sports regulations raises at least two fundamental problems: (a) firstly, to establish which criteria are to be used to determine the proportionate character of the sanctions; and (b) secondly, the opportunity to invest judges or arbitrators of such a task. However, the recent case-law of the CAS on the proportionality test of UEFA Financial Fair-play regulations seems to reveal no less serious concerns and perplexities.

[1] For more details, see my blog and Ben Van Rompuy’s blog.

[2] As a consequence one could argue that the decision of the panel to find that the sanction is disproportionate is probably connected to the fact that Milan was not offered a settlement.

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 2016, the Landgericht München (“Munich Regional Court”) ordered temporary injunctions against the International Basketball Federation (“FIBA”) and FIBA Europe, prohibiting them from sanctioning clubs who want to participate in competitions organized by Euroleague Commercial Assets (“ECA”). The reasoning of the Court is based on breaches of German and EU competition law provisions. FIBA and FIBA Europe are, according to the judge, abusing their dominant position by excluding or threatening to exclude national teams from their international competitions because of the participation of their clubs in the Euroleague. This decision is the first judicial step taken in the ongoing legal battle between FIBA and ECA over the organization of European basketball competitions.

This judgment raises several interesting points with regard to how the national judge deals with the alleged abuse of a dominant position by European and international federations. A few questions arise regarding the competence of the Munich Regional Court that may be interesting to first look at in the wake of an appeal before examining the substance of the case. 

1. FIBA Europe/FIBA vs Euroleague: the dispute’s background

FIBA and FIBA Europe are involved in a bitter struggle with ECA for the control of the European basketball competitions. The dispute commenced with FIBA Europe (fully supported by FIBA) announcing the creation of a Basketball Champions League starting from the 2016-2017 season at the end of last year. Through the new “official” competition, FIBA intends to reinstate its hold over the organization of European championships. Back in 2001, ECA took over the organization of the European professional clubs’ competition after a harsh row with FIBA. FIBA did not trademark the name “Euroleague”, leaving the organisation without any legal avenues to prevent its use elsewhere. It battled for a year with ECA but finally left the organisation of those competitions to ECA in order to promote uniformity at that level of competition. Since then, Euroleague and Eurocup, the continent’s top two clubs’ competitions, are overseen by ECA, a commercial private body owned by the clubs participating in those tournaments. The status quo has now been challenged by the creation of a FIBA rival competition and the newly created fracture in European professional basketball is showing no signs of letting up, risking the possibility of having two continental leagues in competition with each other as of next season. In response to the creation of the FIBA Champions League, ECA announced its intention not only to maintain its competitions but to evolve toward a closed, franchise-based league. In retaliation, FIBA Europe (publicly backed by FIBA) put pressure on national federations by threatening to withdraw their rights to participate in its international competitions, including EuroBasket 2017, if they would continue allowing their clubs to participate in the ECA competitions (Euroleague and Eurocup). FIBA’s position, in that FIBA Executive Committee decided to fully support FIBA Europe’s decision, has also raised concerns surrounding possible sanctions on national teams for the 2016 Rio Olympic Games.  

At this point the dispute moved away from the basketball court to the legal field. The first shoot out occurred in relation to the Euroleague which, in February, filed a complaint before the European Competition against FIBA for alleged abuses of their dominant position (art. 102 TFEU) by threatening national federations to force their professional clubs and leagues to rescind their participation in the Euroleague competitions. From its back court, FIBA caught the ball and, in April, filed a complaint against FIBA Executive Committee decided to fully support FIBA Europe’s decision. FIBA Executive Committee decided to fully support FIBA Europe’s decision. FIBA Executive Committee decided to fully support FIBA Europe’s decision. ECA before the same EU Commission for the same breaches of EU competition law provisions. Possibly for the first time in EU competition law, we have two undertakings filing two different complaints against the same parties for the same alleged breaches of article 102 TFEU. DG COMP, now in the place of a referee, has to decide whether it will open an investigation into the matter and if it so decides, it probably will have to open two procedures (or at least join both of them). 

2. The procedure and the jurisdiction of the Munich Regional Court 

One could think that it was a tight game in the hands of the Commission, but Euroleague, along with 12 professional basketball clubs, decided to spin dribble and scored a buzzer-beater by asking for preliminary injunctions before the Landgericht München. Preliminary injunctions (einstweilige Verfüngung) are interim remedies, provided by the German Code of Civil Procedure, for exceptional cases in civil and commercial matters. They are granted to secure the enforcement of a final judgement that may be endangered before the rights of the parties have been finally determined. Where the case is urgent, the Court is allowed to make a decision ex parte, namely without giving the respondent an opportunity to be heard and without an oral hearing. In the decision, the judge referred to the provision on urgency (section 937(2) of the Code of Civil Procedure) which implies that he felt the pressure of the run-up to the 2016 Rio Olympic Games and the 2016 Basketball Qualifying Tournament scheduled to take place at the beginning of July. Moreover, in its press release following the judgement, FIBA regretted that it was not invited, along with FIBA Europe, to present their views which tends to confirm that, in this case, the conditions for urgency were met and that both the international and European federations were ex parte in the dispute. 

The territorial jurisdiction of the Munich Regional Court is not of concern for FIBA Europe as it is seated in the same city. However, for FIBA, situated in Mies, Switzerland, the question should be addressed. The Court retained its competence from the Lugano Convention of 2007 on jurisdiction and the recognition and enforcement of judgements in civil and commercial matters to which Germany and Switzerland have signed. It then states that “pursuant to article 6(1) (of the) Lugano Convention, in proceedings against a number of defendants that involve the same matter and that it is expedient to hear together in order to avoid irreconcilable judgments, the proceedings may be heard in the place where one of the defendants is domiciled. In this case, this is Munich”. The Court may be too straightforward in establishing its competence.  

The clause on competence enshrined in Article 6(1) provides that “a person (…) may be sued (…) where he is one of a number of defendants, in the courts for the place where any one of them is domiciled, provided the claims are so closely connected that it is expedient to hear and determine them together to avoid the risk of irreconcilable judgments resulting from separate proceedings”. The key legal concept for a national court to derive its competence from the Lugano Convention is whether the claims are so closely connected that a person/entity based in another State (in this case FIBA, Switzerland) may be subject to its scrutiny along with the others defendants (in this case FIBA Europe, Germany). In its decision, the Court enclosed three documents transmitted by the appellants through which the Slovenian, Italian and Hellenic national basketball federations were warned about potential sanctions they were facing due to the actions of their clubs entering into an agreement with ECA. These documents were signed by Kamil Novak, FIBA Europe Executive Director, and referred to FIBA Europe’s Board decision to ban national federations from participating in Senior men’s national team competitions organised by FIBA Europe because their clubs appear to be taking part in ECA competitions. These assumptions were based on press statements about their intention to take part in ECA competitions. The letters are only of relevance to FIBA insofar as a copy of the so-called letter was sent to the international federation. It takes a stretch of the imagination to consider, from these documents only, that the claim against FIBA is closely connected to the one against FIBA Europe.

Moreover, article 2(1) of the Convention provides that “persons domiciled in a State bound by this Convention shall, whatever their nationality, be sued in the Court of that States”. FIBA could argue that this is the case of Swiss Courts. A number of exceptions exist to this general provision. Under article 5(3) “a person domiciled in a State bound by this Convention may, in another State bound by this Convention, be sued (…) in matters relating to tort, delict or quasi-delict, in the courts for the place where the harmful event occurred or may occur”. In that case, FIBA could be sued in Germany because its decisions may have an effect on German basketball clubs. Unluckily, none of the applicants are German basketball clubs which, again, put the competence of the Munich Regional Court into perspective as, in the case of FIBA, there is no harmful effect yet.

In order to justify the competence of the Munich Court, it may be easier to rely on article 6(1) of the Convention, referred to above. In case C-352/13, Cartel Damage Claims (CDC) Hydrogen Peroxide SA, on the interpretation of article 6(1) of Regulation 44/2001, the wording of which is identical to that of Article 6(1) of the Lugano Convention, the Court states that “it is necessary to ascertain whether, between various claims brought by the same applicant against various defendants, there is a connection of such a kind that it is expedient to determine those actions together in order to avoid the risk of irreconcilable judgments resulting from separate proceedings (…) In that regard, in order for judgments to be regarded as irreconcilable, it is not sufficient that there be a divergence in the outcome of the dispute, but that divergence must also arise in the context of the same situation of fact and law” (p. 20). It is true that FIBA publicly backed FIBA Europe when it threatened to extend the ban to its competitions and participation in the Olympic Games) and that the claim before the European Commission was filed by both international and European federations. It seems that the requirement that the same situation of fact and law must arise is satisfied in those circumstances. Moreover, and the judge refers to it, under FIBA’s General Statutes, national federations have the obligation to ensure that their clubs, leagues and players participate only in official international activities and competitions (art. 9.1) upon the risk of sanctions in the event of non-compliance (art. 12). In that case, and as is often the case for sports governing bodies, national basketball federations must implement the rules and decisions from FIBA and FIBA Europe which confirms that there is a connection between the two entities on this particular case and that the Munich Regional Court is presumably competent; even if, in this case, a more in-depth analysis on the rule of jurisdiction would have been welcome. 

3. Is FIBA Europe abusing its dominant position? 

Given that the Munich Regional Court held that it was competent, it granted preliminary injunctions to FIBA on the ground of an abuse of a dominant position under EU law (art 102 TFEU) and under the corresponding provisions in German law.  

The Court defined two markets where FIBA and FIBA Europe each hold a dominant position. FIBA is dominant on the market for “competitions of the national team”. That dominant position relies, according to the judge, on article 1(2) of FIBA’s Statutes providing that “FIBA is the sole competent authority for basketball throughout the world and is recognised as such by the International Olympic Committee”. A broader market definition for FIBA, as a worldwide basketball regulator, would be the market for basketball competitions. It is not contested that international federations hold a dominant position at the top of a sports organisation nor that they regulate all matters related to their sports with other (continental and national) federations and bodies at lower levels. This position is then secure by the principle of solidarity which, in the case of basketball, can be found in article 1(4), which provides that “all bodies and officials of FIBA must observe the General Statutes, Internal Regulations, other rules and regulations, and decisions of FIBA”, and article 9, which lists the obligations of members. That principle is reinforced with a mechanism of sanctions (articles 10, 11 and 12). However, the market may appear too broad. A narrower market may be the market for international basketball competitions of the national teams excluding continental competitions. This market would specifically target the mission of FIBA as an international competitions organizer for basketball. In particular, FIBA is responsible for the organisation of the FIBA Basketball World Cup and the FIBA Olympic Qualifying Tournament, with both competitions determining which teams will participate in the Olympic Games. While defining a market for “competitions of the national teams”, the judge targeted both of the markets where FIBA holds a dominant position. For FIBA Europe, the judge defined a market for “European competitions of the national teams”. This market covers FIBA Europe’s mission to organise the EuroBasket. The alleged excluding practices are related to the participation in European and international competitions of the national teams, so it seems that both narrower markets are relevant in the case where FIBA and FIBA Europe hold dominant positions.

While defining the relevant markets, the judge only targets competitions for national teams. Does the same still apply for club competitions? The core problem of the dispute is about the organisation of basketball professional club’s European competitions. If one would define a market for the professional basketball clubs’ European competitions that market may exists and ECA, as the sole organiser of Euroleague and Eurocup, is in a dominant position. The creation of the Basketball Champions League is an attempt from FIBA and FIBA Europe to enter that market and challenge that dominant position.  

Holding a dominant position on a market is not contrary to EU competition law provisions, but rather it is the abuse of that dominant position that needs to be examined. In the case of FIBA, the judge considers article 9(1) of FIBA Statutes regarding the obligations of the members, i.e., national federations. Under provision (d), “national member federations must (…) ensure at all times that their leagues, clubs, players and officials participate only in international activities and competitions officially recognised by the respective national member federations and by FIBA”. FIBA Europe sent a letter to three national federations advising them that their right to participate in Eurobasket 2017 had been withdrawn because some of their professional clubs chose to compete in the Euroleague 2016/2017. A copy of this letter was transmitted to FIBA, “which is competent to take any decisions it deems necessary regarding worldwide events”. From these letters, it is clear that FIBA and FIBA Europe used or will use their regulatory power to sanction national federations for a breach of their solidarity obligations. By doing so, national federations are excluded from all European and international competitions. Moreover, the pressure on national federations will probably lead to the exclusion of ECA from the market for professional basketball clubs’ European competitions as none of the clubs will be able to participate in the Euroleague. In that case, article 9(1) can rightly be qualified as an exclusivity clause that leads to an exclusionary abuse by dominant undertakings, and the judge is rightly assessing the situation, FIBA is abusing its dominant position by threatening to exclude national basketball teams from the 2016 Olympic qualifying tournament and, by extension, the 2016 Olympic Games. FIBA Europe is also abusing its dominant position by, in its case, excluding national basketball teams from the Eurobasket 2017. The fact that FIBA/FIBA Europe are creating a new European competition for clubs has nothing to do with their dominance; rather, a competition problem occurs when they use their power to sanction national federations by pressuring them to force their clubs to participate in the “official” competition. Similar situations are arising where international federations are fighting the emergence of “unsanctioned” private leagues by using their sanction powers. The Belgian competition authority already granted interim measures to the Longines Champions League in a dispute where the FEI tried to suspend riders and horses that were participating in the competition. A similar case involving ISU and suspended ice speed skaters is pending before the European Commission.  

Nonetheless, the German Court goes on to mention possible justifications to FIBA/FIBA Europe’s behaviour pertaining to article 101 TFEU. This is rather surprising, even though such a stance is permissible, after it just concluded there had been a breach of article 102 TFEU. If article 101 was to be applied, it could be argued that the fact that FIBA Europe and FIBA are excluding national federations constitutes concerted practices leading to restrictions upon competition on the market for professional basketball clubs’ European competitions. In that case, the analysis could move to article 101§3 and examine proportionate justifications. The judge seems sensible that the outcome of FIBA and FIBA Europe’s practices cannot lead to anything other than undermining the viability of Euroleague competitions by preventing clubs to participate. It does not appear, as such, as a proportionate justification.

However, the judge may, again, be too straightforward in his application of articles 101 and 102 TFEU. FIBA and FIBA Europe may argue that there are justifications for using their sanctions power. The Court of Justice already held that not every sporting rule that is capable of restricting competition infringes articles 101 and 102 TFEU (C-519/04, Meca Medina). In that case, in assessing the compatibility of the obligation for national basketball federations to force their professional clubs to take part in the Basketball Champions League upon sanction by the international and European federations, the judge must take into account the Wouters criteria (C-309/99): (i) the objectives of FIBA and FIBA Europe measure; (ii) whether the consequential effects that restrict competition are inherent in the pursuit of those objectives; and (iii) whether they are proportionate to them. As seen before, the pressure on national federations will probably have an adverse effect on competition, making it impossible for ECA to organise a viable competition as no professional clubs will take part (this doesn’t take into account the third factor – that professional clubs do not have any interest in European and international competitions, and that they are probably better off keeping their players). Nonetheless, FIBA may bring previous case law and article 165 TFEU to the dispute and argue that there is no breach of EU competition law in the sense that restrictive effects on competition are, in this case, inherent and necessary to the organisation of basketball. The specificity of sports organisations, the solidarity mechanisms between different levels of competition and the pyramidal structures have already been recognised. FIBA Europe and FIBA are, here, making sure that national federations comply with article 9(1) of the FIBA Statutes and that professional clubs will participate in its European competitions. FIBA is then meant, as the sole legitimate basketball authority, to apply sanctions if its members do not comply with their obligations. All the reasoning will focus on proving that these effects are proportionate to the legitimate genuine sporting interest pursued. The impact of FIBA Europe’s decision (and FIBA potential decision) is really important, and, it is readily apparent that FIBA should not focus on its commercial exploitation of the Basketball Champions League competition as it has already been decided that rules prohibiting clubs or athletes from participating in competitions other than those organised by sports federations under the threat of penalties do not comply with EU competition law provisions (see for example the FIA Commission decision, IP/01/1523). On the other hand, the Lethonen case on transfer periods (C-176/96) may be useful as a rule whose objective is to ensure the regularity of competitions (competitive balance, functioning of the championships and effective calendar) is more likely to comply with articles 101 and 102 TFEU. Those are just possible justifications and there is sufficient flexibility in articles 101 and 102 TFEU for FIBA and FIBA Europe to justify more proactive behaviours under EU competition law.  

The German judge also disregarded possible objective justifications under article 102 TFEU. In that case, again, the monopolistic pyramid structure of sport may be taken into account.  

The judge goes on to say that FIBA must await the outcome of antitrust proceedings before the Europe Commission regarding whether ECA is also abusing its dominant position. This is, again, really surprising for two reasons. On one hand, the judge does not tackle the behaviour of ECA in his decision. As discussed, ECA enjoyed a monopoly over the organisation of European competitions that FIBA and FIBA Europe wanted to challenge by creating the Basketball Champions League. In that dispute, ECA is also using its monopoly position toward professional clubs and national leagues to consolidate its organisation. On the other hand, filing a complaint before the European Commission does not presume that DG Competition will open an investigation on the matter. DG COMP enjoys a broad discretion with regard to opening an investigation based on the complaint. What will happen to FIBA if the Commission decides to reject the complaint without analysing its substance? Moreover, an in-depth investigation is a (very) long procedure that can take years before the Commission issues a decision. The German judge is putting FIBA and FIBA Europe under a lot of legal uncertainty and, while protecting the rights of Euroleague, threatened the viability of the European Basketball League if, in the end, ECA is also abusing its dominant position. This is probably the most questionable point in this judgement. 

Finally, the judge finds that “the entitlement to take part in Olympic Games should be decided for sports reasons. The decision of certain clubs to take part in a certain club competition has, in terms of sport, nothing whatsoever to do with a national team’s participation in international competitions”. Putting aside the fact that national teams are composed of athletes coming from those clubs and the controversies that already exist about the release of players, it is difficult to understand what the judge meant by this. FIBA is recognised by the IOC as the sole worldwide competent authority for basketball. As such, national federations must respect the rules FIBA sets in order to qualify for the Olympics. Regardless of the contested practices at stakes, FIBA has the power to sanction a federation if the latter does not comply with its regulations and the participation in its competition may be one of the sanctions it can impose.  

As a conclusion, it may be recalled that this judgement is provisional and probably the first of a long series. FIBA has already announced its intention to appeal the judgement, highlighting the fact that the contested sanctions were already withdrawn by FIBA Europe’s Board a few days before the Munich Regional Court released its decision and ECA’s position hasn’t properly been assessed. However, these circumstances and facts should not obfuscate the key legal question here – namely, the assessment under EU competition law of the use by international federation of its regulatory powers to stop the emergence of unsanctioned competitions.