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

Nudging, not crushing, private orders - Private Ordering in Sports and the Role of States - By Branislav Hock

Editor's note: Branislav Hock (@bran_hock)  is PhD Researcher at the Tilburg Law and Economics Center at Tilburg University. His areas of interests are transnational regulation of corruption, public procurement, extraterritoriality, compliance, law and economics, and private ordering. Author can be contacted via email: b.hock@uvt.nl.


This blog post is based on a paper co-authored with Suren Gomtsian, Annemarie Balvert, and Oguz Kirman.


Game-changers that lead to financial success, political revolutions, or innovation, do not come “out of the blue”; they come from a logical sequence of events supported by well-functioning institutions. Many of these game changers originate from transnational private actors—such as business and sport associations—that produce positive spillover effects on the economy. In a recent paper forthcoming in the Yale Journal of International Law, using the example of FIFA, football’s world-governing body, with co-authors Suren Gomtsian, Annemarie Balvert, and Oguz Kirman, we show that the success of private associations in creating and maintaining private legal order depends on the ability to offer better institutions than their public alternatives do. While financial scandals and other global problems that relate to the functioning of these private member associations may call for public interventions, such interventions, in most cases, should aim to improve private orders rather than replace them.

FIFA example – from gentlemen’s agreements to a rich global regulator

FIFA is the governing body for football (or soccer, as it is known in some countries). Founded in 1904 under Swiss law by seven football associations, just 40 years ago, FIFA was a small gentlemen's club with a staff of 11, far from politics, which produced little cash. Since then, it has evolved into a powerful organization generating billions of dollars in annual revenues through sales of media and marketing rights; now it employs hundreds. The rise of FIFA has been a continuous process that was made possible by the reluctance of states and supra-national organizations such as the European Union (EU) to intervene in the governance of sport, particularly football. Hence, supported by and benefitting from the special treatment of sports, FIFA filled the regulatory gap and strengthened its status as a private regulator.

Besides the rules of the game, FIFA’s legal order includes privately-designed rules of cooperation and a complex organizational structure that spans every involved party including players, clubs, coaches, managers, club investors, officials, sponsors, and spectators. The centerpiece of the relations regulated by the rules of FIFA are employment-related questions. Most importantly, FIFA’s Transfer Regulations create strong tensions between FIFA’s regulatory autonomy and public orders such as the sovereign jurisdictions of FIFA’s member associations and supra-national organizations. Tensions between different levels of employment rules are especially visible in matters related to equality and/or non-discrimination of workers, the treatment and qualification of minors, the freedom to choose employment, and the freedom of movement. For example, the inability of players to terminate their contracts without cause, before expiry and without paying compensation, is in stark contrast with traditional employment laws, according to which employees are free to end employment without cause by prior notice. Figure below illustrates the relationships between the different levels of “football ordering” and public ordering when it comes to labor rules.

The Relationship of Labor Rules in Football

Furthermore, FIFA has also private dispute resolution venues and sophisticated system of sanctions and incentives promoting compliance with the decisions of the private order’s dispute resolution bodies. Possible sanctions vary but they are leveraged by the monopoly power of FIFA. Consider the right of FIFA to suspend a member association for a specific period or expel it fully from FIFA for failure to comply with its obligations, including an obligation to comply with FIFA or CAS decisions. Given FIFA's monopoly, this, in fact, means that national teams and licensed clubs from the suspended or expelled country cannot participate in any organized game. As a consequence, FIFA has been able to maintain cooperation among all involved actors, yet, along with the increasing commercial dimension, the incentives of states and other public orders, particularly the EU, to intervene have grown.

Integrity vs. legal order

The fact that FIFA is undermined by corruption is nothing surprising. Prof. Alina Mungiu-Pippidi shows that the average public integrity in more than 200 countries whose soccer associations are the FIFA constituents “is just 5, on a scale where New Zealand has ten and Somalia 1” […] “Were FIFA a country, it would clearly not be in the upper half, but somewhere near Brazil, whose officials seem to have been waist deep in its corruption, and which ranks around 121, with a 4.2”. FIFA’s administrative structure, certainly, needs reforms that will improve its financial stability and decrease corruption risks within the organization. These reforms, indeed, may require “public nudge” by the enforcement of extraterritorial “anti-mafia” statutes such as the US Racketeer Influenced and Corrupt Organization Act (RICO) that played the central role in the so-called FIFAGate. Moreover, in the light of “the second FIFAGate”—six months after the original scandal, a number of FIFA officials that replaced the old leadership were charged with a 92-count indictment—and after the recent neutralization of its internal corruption investigations (see here), more radical “public nudge” may be desirable. Indeed, these developments, as was discussed in this blog some time ago, may call for a more powerful intervention by, for example, the EU, to impose ‘certain basic “constitutional” requirements’ to FIFA.

Nevertheless, while FIFA may need “public help” to clean its house and improve some areas of its legal order, no public order is a better alternative. Common rules spanning across borders, predictable contractual relations, and incentives to invest in training young players are only some advantages made possible by FIFA’s tailored rules of behavior. These advantages would be lost if public interventions would crash the FIFA order and replace it by a patchwork of national laws, unstable contractual relations, more costly dispute resolution and enforcement mechanisms, and limited ability to encourage talent development. Therefore, while FIFA as an administrative organization may generally be considered as more corrupt than an average government, it has been able to offer harmonized institutions that in many cases are better accustomed to the needs of the involved parties than their state-made alternatives, which often are based on one-size-fits-all approach and lack certainty of application.

Public orders as the reversed civil society

It does not mean that public orders such as the EU and nation states should do nothing. Private entities often need a “public nudge” not only to prevent excesses, but also to maintain incentives to produce rules that reflect new economic and social developments. In numerous writings (for an overview see Katz), law-and economics scholars indicate that while in principle private orders should be best left alone, states should limit the potential of powerful interest groups to undermine the roots of private orders such as FIFA. Who, how, and when should determine the benchmark of what is excessive is difficult, and law-and economics has declined to offer a general theory of the role of public orders in nudging private orders to limit interest groups’ power. Nevertheless, determining the role of public orders is no more difficult than the question what civil society should do when it comes to the performance of nation states.

In the context of nation states, the key role in limiting the power of elites belongs to the civil society. In case of monopolistic orders such as FIFA’s, however, there is often no direct representation of various actors inside such orders. Shouldn’t, then, states and the EU assume the role of a reversed civil society when interacting with large and successful private orders? In practice, particularly the EU is more and more involved in an informal co-determination of football-related regulation (for similar argument see here). For example, the recent social dialogue in European football, brokered by the EU Commission, is an example how public orders can fulfill their role as reversed civil society. The EU Commission, instead of intervening directly and regulating sports, encouraged, and should do so much more, various stakeholder groups, such as the European Club Association and FIFPro, to engage in a dialogue with the purpose of improving the practices of player protection (however, it is true that the EU Commission had a way deeper impact through EU competition law, see Duval). For the private order itself participation in this dialogue and active encouragement of the enforcement of its results is the best way to guarantee its role as a supplier of rules (see generally Colucci & Geeraert). In contrary, refusal to accommodate certain mechanisms, and mainly these that effectively limit FIFA’s executives’ power (e.g. Ethics Committee), may lead to a forceful, but legitimate, public intervention with possibly tragic consequences for the world of football.

Conclusion: Taking over fallen FIFA

What is so fascinating about FIFA is that it exemplifies how a very small number of enthusiastic people could set a mechanism that is ultimately able to create institutions that aim to regulate behavior of involved actors globally as well as to keep them away from regular courts. FIFA is an example of an order that has created huge economic and social value by being able to overcome many hurdles that prevented countless other member associations from creating their own orders (think of lawyers or investment bankers, for example). The fact that such order locks-in all involved football actors, despite some, such as small teams, benefiting significantly less by their participation than others, suggests that there is a value, despite FIFA’s monopoly power, that alternatives cannot offer. Some of them, such as increased certainty, are in the interests of all involved actors, whereas others, such as commitment to enforce contractual practices or training compensation awards, are more preferred by sophisticated actors (i.e. clubs and prominent footballers) and small clubs, respectively. This, though not allowing to state plainly that the private order is maximizing the welfare of all involved actors, also does not justify arguments for abandoning the current system in favor of state laws. In contrary, failure to accommodate mechanisms that limit the power of inside interest groups might undermine the order by giving incentives to interest groups to advocate public orders’ involvement, thereby putting an end to the monopoly of FIFA’s order, and possibly its destruction.

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

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

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. They insist that “no decision maker within an anti-doping organization should hold a board, officer, or other policy-making position within a sport or event organizer”. WADA welcomed the reform proposals and pledged to discuss them at the upcoming meeting of the foundation board. The necessity of such a reform, or at least of improving the effectiveness of the anti-doping system, has been highlighted (again!) by the release of WADA’s Report of the Independent Observers concerning the 2016 Rio Olympic Games. The reports point out that “the logistical arrangements made by Rio 2016 to support the sample collection process at official venues during the Games suffered from a number of serious failings”. These “foreseeable and entirely avoidable” logistical issues resulted in a strained sample collection process. On the way forward to reform WADA you can read some ASSER proposals in a recent policy brief by our Senior Researcher Antoine Duval. 


The Sharapova CAS award

Everything related to Maria Sharapova is necessarily making a lot of noise. Unsurprisingly, the CAS award on her positive doping test to Meldonium has attracted a lot of media attention. The decision in the dispute between Maria Sharapova and the International Tennis Federation (ITF) reduced the period of her suspension by nine months. The Russian tennis star had, during the Australian Open in January 2016, tested positive for the presence of Meldonium. A substance which had, for the first time, been put on WADA’s prohibited list in 2016. Subsequently, Sharapova announced she had been taking Mildronate tablets that had been prescribed by her doctor for many years. As her medical team “had failed to notice” that Meldonium was included on the list of prohibited substances, Sharapova claimed to be unaware that she committed a violation of an anti-doping rule. The CAS Panel shortened the period of ineligibility from the initial period of two years (imposed by the ITF’s judicial body) to fifteen months. It emphasized that the case turned on “the degree of fault that can be imputed to the player for her failure to make sure that the substance contained in a product that she had been taking over a long period remained in compliance with the anti-doping rules”. Given that her ban started on 26 January 2016, Sharapova will already be back in action late spring 2017. This ASSER International Sports Law blog by Marjolaine Viret, triggered by the Sharapova case, tackles the specific questions of the athletes (ir)responsibilities when taking medication. To what extent should they consult experts before taking a medication and to what extent can we assume that they are sufficiently qualified to assess the doping consequences of a specific product. .


The Bundesgerichtshof’s ruling in the SV Wilhelmshaven case

The ruling by Germany’s Highest Civil Court in the SV Wilhelmshaven case challenging FIFA’s training compensation system has been released. The BGH sided with the club but declined to pronounce itself on the compatibility of the FIFA regulations with EU law and on the validity of the original CAS award. The Asser International Sports Law Centre together with the Dutch Federation of Professional Football Clubs (FBO) organized a high-level conference on the case. You can read the conference report here.


New developments regarding State aid in sport

Real Madrid claim to have returned the State aid of €20.3 million it illegally received from the municipality of Madrid through various land transactions. However, the Spanish giants have also underlined that it is seeking annulment of the Commission’s decision at the Court of Justice of the EU, meaning that the saga continues despite the repayment.

The “Real Madrid appeal” has not yet been registered officially with the CJEU, contrary to the appeals launched by Athletic Club de Bilbao and Valencia CF respectively. Bilbao’s appeal concerns the Commission’s conclusion that Spain’s corporate tax system was selectively favourable for the clubs Athletic Club Bilbao, Osasuna, FC Barcelona and Real Madrid CF in comparison to the other clubs in Spain. At this moment it is still unknown whether the other clubs will join the appeal. More information on this State aid decision can be found in the blog written by Oskar van Maren.

In addition to its action for annulment, Valencia CF also launched proceedings for interim measures which aim to suspend the repayment of the aid until the General Court decides in the main proceedings. In parallel, the Spanish public authority responsible for ordering the return of the State aid from Valencia CF, i.e. the government of the autonomous region of Valencia, has asked the Commission to prolong the deadline for the return of the aid. These two requests need to be read in light of Valencia CF’s current financial situation. Its obligation to repay more than €23 million could well mean the bankruptcy of the Champions League finalist of 2000 and 2001.

Our in-house State aid and sport expert, Oskar van Maren, will dissect all the decisions of this year in a special lecture (State aid in Football: The year of the European Commission) on 24 November. 


Just Published! The Yearbook of International Sports Arbitration

Senior Researcher and head of ASSER International Sports Law Centre, Antoine Duval, has just published with CAS expert (and lawyer) Antonio Rigozzi a new Yearbook of International Sports Arbitration (the 2015 edition is available here). This is the first ever academic publication aiming to offer comprehensive coverage, on a yearly basis, of the most recent and salient developments regarding international sports arbitration, through a combination of general articles and case notes.


Case law

CAS

CAS 2016/A/4643 Maria Sharapova v. International Tennis Federation

CAS 2016/O/4684 The Russian Olympic Committee (“ROC”), [Russian Athletes] v. The International Association of Athletics Federations (IAAF)


EU

EU Commission State Aid SA.44439 (2016/N) – Sporting Arena Cork – Ireland


IOC

IOC Disciplinary Commission decision regarding Anna Chicherova

IOC Disciplinary Commission decision regarding Tatyana Lysenko


Wilhelmshaven ruling

Bundesgerichtshof Urteil vom 20. September 2016 - II ZR 25/15 - OLG Bremen LG Bremen


Other

Doyen’s Appeal to FIFA’s TPO ban before Paris court 


Official documents and Press releases

CAS list of hearing November and December

CAS The Court of Arbitration for Sport Reduces the ban of Maria Sharapova to fifteen months

CAS Essendon Case: The appeal filed by 34 players is not entertained by the Swiss Federal Tribunal

CAS The Court of Arbitration for Sport issues decisions in the case of five Russian racewalkers

CAS IAAF appeal upheld – Rita Jeptoo suspended for four years by the Court of Arbitration for Sport

CIES Football Observatory Monthly Report n°18 - October 2016, “Recruitment strategies throughout Europe”

Commentary by the Spanish anti-doping agency AEPSAD on the whereabouts High Court decision (in Spanish)

European Parliament Committee on Culture and Education on an integrated approach to Sport Policy: good governance, accessibility and integrity (2016/2143(INI))

FIFA Several football associations sanctioned after discriminatory and unsporting conduct of fans

FIFA President Infantino provides update on steps taken to improve governance and compliance as well as football development efforts

Spanish FA sanctioned for international transfers of minors

IAAF Ethics Board Statement on preliminary investigations into ‘brown envelope’ rumours surrounding bid for 2017 World Championships

IOC Declaration of the 5th Olympic Summit Protecting clean athletes is an absolute priority for the entire Olympic Movement

NADA-Statement zum 5. Olympic Summit

UK Parliament Culture, Media and Sport Committee, The Governance of Football inquiry

WADA Statement regarding Maria Sharapova CAS decision

WADA statement regarding Olympic Summit

WADA Compliance Review Committee Update

WADA Statement by Richard H. McLaren, Independent Person, Concerning Release of his Investigation Report, Part II

WADA Report of the Independent Observers, Games of the XXXI Olympiad, Rio de Janeiro 2016

WADA statement regarding renewed NADO anti-doping reform proposals 


In the news

Doping

AP, New WADA director general Olivier Niggli anticipates more state-sponsored doping

Nick Butler, Exclusive: IOC Medical Commission chair calls for more Government funding for WADA

Nick Butler, WADA report is microcosm of everything wrong with Rio 2016 and IOC

Causa Sport, „Fall Scharapowa“: Unachtsamkeit schützt vor (Doping-)Strafe

George Georgakopoulos, Greece lags in doping tests and would need assistance

David Millar, How to Get Away With Doping

Michael Pavitt, New testing authority within WADA proposed at Olympic Summit

Sport Leaks and Doping Leaks

Luis Torres Montero, Claves de la reducción de la sanción a Sharapova: análisis del reciente laudo del TAS

Jonathan Sachse and Daniel Drepper, Wie VfB Stuttgart und SC Freiburg Doping organisierten

Thorhild Widvey, WADA Must Be Reinforced and Publicly Supported 


Football

Vivek Chaudhary, FIFA's Gianni Infantino may face Ethics Committee investigation

Willem Feenstra, FIFA charged with complicity in human rights violations Qatar

Keir Radnedge, Infantino talks a good game about Fifa reform, but can he deliver?

Mike Ticher, Human error is part of football and video refereeing will solve nothing  


Ice Skating

Ernst Bouwes, De internationale sportweek van S&S: EU geeft schaatsers gelijk in 'Ice-derby'-zaak

Causa Sport, Kartellverfahren gegen den internationalen Eislaufverband ISU: Das „Ein-Platz-Prinzip“ vor dem Aus? 


Other

Brittany Bronson, Politicians Place a Bet on a Stadium, and Vegas Pays for It

Juliet Macur, Long Before Kaepernick, There Was Navratilova

Rebecca Ruiz, Russia Sports Minister Promoted to Deputy Prime Minister 


Academic materials

Antoine Duval, Tackling Doping Seriously - Reforming the World Anti-Doping System after the Russian Scandal

Despina Mavromati, Application of the 2015 WADA Code through the Example of a recent CAS Award (Sharapova v. ITF)

Despina Mavromati, The Role of the Swiss Federal Tribunal and Its Impact on the Court of Arbitration for Sport (CAS)

Mordehai Mironi, The promise of mediation in sport-related disputes

Michal Radvan and Jan Neckář, Taxation of Professional Team Sport Athletes in the Czech Republic


Books

Antoine Duval and Antonio Rigozzi, Yearbook of International Sports Arbitration 2015 


Blogs

Richard Bush, Best practice for Sports Governing Bodies when dealing with individual complainants: Part 1 - Internal procedure and Part 2 - Guidelines for legal teams

Sean Cottrell and Mark Hovell, Life as a CAS arbitrator at the Rio Olympic Games

Sean Cottrell, Protecting the integrity of the Rugby World Cup - Ben Rutherford, Senior Legal Counsel and Integrity Unit Manager at World Rugby

Sean Cottrell, Nick De Marco, Nick Tsatsas and Richard Berry, How does the transfer market influence the integrity of football?

Nick De Marco, “Football for Sale” - What is the problem, and what are the solutions?

Antoine Duval and Kester Mekenkamp, De- or Re-regulating the middlemen? The DFB’s regulation of intermediaries under EU law scrutiny at the OLG Frankfurt

Jon Elphick, How athletes will be affected by the UK’s changes to “non-dom” tax rules

Alex Haffner and Krish Mistry, The law on banning athletes from competing in rival sports leagues

Philip Hutchinson, Who shoulders the blame? An analysis of vicarious liability in the sports industry

Interpol Integrity in Sport Bi-Weekly Bulletin - 3-16 October 2016 and 17-31 October 2016

Christian Keidel and Alexander Engelhard, How the Bundesliga’s new “no single buyer” rule has increased the broadcasting revenue for German football

Saurabh Mishra, Important lessons for athletes on doping sabotage: A review of WADA v. Narsingh Yadav

Laura McCallum, An overview of key case law relating to negligent liability for sports injuries (Part 1) and (Part 2)

Alice McDonald, Footballers facing tax fines: who is responsible for inaccurate tax returns?

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

Michael Rueda, What is next for NCAA student-athletes? From O'Bannon onto Jenkins

Ralph Russo, Although NCAA loses its appeal, future still hazy

Luke Sayer, Possible ways the Therapeutic Use Exemptions system can be improved to prevent abuse

Zane Shihab and Nick Bitel, What effects have FIFA’s Intermediaries Regulations had on player representation and commission levels?

The Swiss Ramble, Arsenal - New Sensation

The Swiss Ramble, Borussia Dortmund - The Sound Of The Crowd

The Swiss Ramble, Manchester City - My Aim Is True

The Swiss Ramble, Stoke City - But I'm Different Now

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

Ben Van Rompuy, What can EU competition law do for speed skaters?

Marjolaine Viret , Taking the Blue Pill or the Red Pill: Should Athletes Really Check their Medications against the Prohibited List Personally? 


Upcoming events

18 November - Football Law Conference and Sportspersons’ Dinner, St John’s Buildings Barristers’ Chambers and the Centre for Sports Law Research at Edge Hill University, Stretford, UK

24 November – Sports Law Lecture “State aid in Football: The year of the European Commission”, T.M.C. Asser Instituut, The Hague, the Netherlands

8 December - Actualiteitencursus Internationaal Sportrecht, De Kempenaer Advocaten, Arnhem, the Netherlands


 


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