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

Investment in Football as a Means to a Particular End – Part 1: A non-exhaustive Typology - By Rhys Lenarduzzi

Editor's note: Rhys is currently making research and writing contributions under Dr Antoine Duval at the T.M.C. Asser Institute with a focus on Transnational Sports Law. Additionally, Rhys is the ‘Head of Advisory’ of Athlon CIF, a global fund and capital advisory firm specialising in the investment in global sports organisations and sports assets.

Rhys has a Bachelor of Laws (LL.B) and Bachelor of Philosophy (B.Phil.) from the University of Notre Dame, Sydney, Australia. Rhys is an LL.M candidate at the University of Zurich, in International Sports Law. Following a career as a professional athlete, Rhys has spent much of his professional life as an international sports agent, predominantly operating in football.

Rhys is also the host of the podcast “Sportonomic”.


Introduction

In the following two-part blog series, I will start by outlining a short typology of investors in football in recent years, in order to show the emergence of different varieties of investors who seek to use football as a means to a particular end. I will then in a second blog, explore the regulatory landscape across different countries, with a particular focus on the regulatory approach to multi-club ownership. Before moving forward, I must offer a disclaimer of sorts.  In addition to my research and writing contributions with the Asser Institute, I am the ‘Head of Advisory’ for Athlon CIF, a global fund and capital advisory firm specialising in the investment in global sports organisations and sports assets. I appreciate and hence must flag that I will possess a bias when it comes to investment in football.

It might also be noteworthy to point out that this new wave of investment in sport, is not exclusive to football. I have recently written elsewhere about CVC Capital Partners’ US$300 million investment in Volleyball, and perhaps the message that lingers behind such a deal.  CVC has also shown an interest in rugby and recently acquired a 14.3 per cent stake in the ‘Six Nations Championship’, to the tune of £365 million.  New Zealand’s 26 provincial rugby unions recently voted unanimously in favour of a proposal to sell 12.5 per cent of NZ Rugby’s commercial rights to Silver Lake Partners for NZ$387.5 million.  Consider also the apparent partnership between star footballer’s investment group, Gerard Pique’s Kosmos, and the International Tennis Federation.  Kosmos is further backed by Hiroshi Mikitani’s ecommerce institution, Rakuten, and all involved claim to desire an overhaul of the Davis Cup that will apparently transform it into the ‘World Cup of Tennis’. Grassroots projects, prizemoney for tennis players and extra funding for member nations are other areas the partnership claims to be concerned with. As is the case with all investment plays of this flavour, one can be certain that a return on the capital injection is also of interest.

So, what are we to conclude from the trends of investment in sport and more specifically for this blog series, in football? A typology elucidates that a multiplicity of investors have in recent years identified football as a means to achieve different ends. This blog considers three particular objectives pursued; direct financial return, branding in the case of company investment, or the branding and soft power strategies of nations.

From Associations and Member Owned Clubs, to Corporate Structures

It is important to point out that the ability to use football as an investment tool is only possible due to the ways in which football has transformed from associations to corporations over recent decades. For the purpose of this short blog, I will give the simplistic and short story, though I would urge those interested to go beyond this blog on the history of football ownership models and trends.

Essentially what I hope to emphasise, is the influx of private ownership and the advent of substantial television rights deals cannot be divorced. At this pivotal turn for football ownership, private ownership had been taking place in some forms, often a hybrid model with members, and often the case was a private owner coming in and saving or at least supporting a club financially.  Whereas at the start of the 1990s when broadcast deals made headlines, private owners saw a commercial opportunity as football moved into a generation where broadcasting rights were the main source of revenue for clubs.  By the early 2010s in Europe, “approximately three of four professional clubs were majority owned by private investors, and one in six clubs were owned by foreign investors”.[1] Football club owners hence quickly became more business orientated and more market-driven due to the opportunities that broadcasters presented and the benefits leagues and organisers were able to conjure up. “The growing prize money of the UEFA Champions League, the escalating TV revenues for premium competitions, and the internationalization of marketing measures have strengthened the incentives”.[2]

Private owners saw member owned clubs as unable to maximise commercial opportunities, and it is the same kind of sentiment that is aimed towards the less commercially mature sports by Private Equity groups and other institutional players today.  That being, yes, you may know your sport, but you do not know how to take it to the heights it could achieve in the commercial sense.

Investing for Direct Return: Private Equity

Private Equity firms are notorious for being able to identify undervalued businesses that they can further improve the value of by trimming unnecessary or wasteful expenses, as well as reconstruct operations and other inefficiencies. The priority of course is to make money and a return for investors. 

A variety of Private Equity groups have found football appealing in recent years as clubs look for non-traditional means of funding and in some extreme instances, rescuing from bankruptcy. Larger Private Equity groups have come to be known to accrue a portfolio of football clubs and other sports asset investments in order to diversify their sports investment wings, and to maximise returns for investors.  For the boutique firms, the strategies might be more considered and to the observer less audacious, identifying undervalued and underperforming smaller clubs with a history at the top tiers of football or the potential to get there. There may of course be other commercial motivations for specific acquisitions, such as the location of clubs, though in a nutshell, these Private Equity plays are a matter of identifying undervalued football clubs with scope to grow in value, in turn providing an opportunity to make investments and acquisitions at a low entry point and to deliver substantial results for investors. 

Whilst examples of Private Equity investment into football are a plenty, conder the following few for the purpose of this short blog. As an example of a multi-club ownership portfolio, New City Capital, fronted by Chinese American, Chien Lee, now boasts investment and ownership in Barnsley F.C. (England), FC Thun (Switzerland), K.V. Oostende (Belgium), AS Nancy (France), Esbjerg fB (Denmark), and is the former owner of OGC Nice (France); selling the club at the time for a record price in the French context. Lee and his multiple co-investors bring strategies and philosophies to these clubs akin to the “Moneyball” strategies made famous by Billy Beane. With a business background, the investors involved clearly fancy their abilities to maximise value of the clubs, but Lee is additionally conscious of his ability to grow the value of the clubs by the ways in which he has been able to tap into Asia and create new fans and revenue streams based on these connections. “We will try to ‘internationalize’ Barnsley, as we did with Nice. Before we invested in Nice, not many people in Asia had heard of them. Now in Asia -- in China -- people know the club.”

In terms of opportunistic timing strategies, as well as funding arrangements in order to complete an acquisition, one may consider another noteworthy example in the Private Equity space, that of ALK Capital’s takeover of Burnley. A leveraged buyout play, the sports investment arm of ALK, Velocity Sports Partners, acquired majority and controlling shareholding of 84% late 2020. For its part, Redbird Capital has made a variety of investments into football, in a variety of ways. They took a direct stake into Toulouse FC, but have also made an interesting investment into the Fenway Sports Group that owns Liverpool FC. This ultimately highlights an overarching view that football is a good bet for the firm, yet also showing that investment into the world game may come in many shapes and sizes.

It is the case that with the aforementioned examples, the investments have been a success insofar as the assets and portfolios of these firms have experienced growth in value, for example New City Capital sold OGC Nice for a handsome return. However, one must also point at investment failures such as King Street Capital with Girondins Bordeaux. Some of the identifiable distinctions between those firms able to achieve their objectives or at least stay the course, and the King Street Capital debacle, appears to be among other things, a fractured relationship with local government and the distance between the firms ambitions, control over that ambition and those running the club (COVID-19 to an extent as well).

Investing for Nation Branding: Qatar & UAE, Soft Power & Sports Diplomacy

Insofar as football remains the world game, nations are acutely conscious of the consequent power in nation branding via football investment. Nation branding according to Dinnie’s summary, consists of three key objectives; to attract tourists, to stimulate inward investments and to boost exports.[3] For a nation like Qatar, it is additionally about security and standing on the international scene.  To attain such objectives though of course requires certain image and branding achievements. In recent years, it is notable that a variety of states have been using their financial power to invest in football, not for the sake of profit, but in order to improve their image internationally.

State branding via soft power strategies like investment in football has come to be known widely as sports diplomacy. A variety of nations have identified sports diplomacy as way in which to be viewed favourably by other nations and to create positive imagery around an investment that in turn reflects positively on the nations image. Soft power and sports diplomacy has been endorsed by scholars as legitimate strategies, given it is a non-military instrument to compete with much larger and militarily capable states.[4] This is of course key to a nation like Qatar, that desires to move away from oil dependency and has to compete with much larger neighbouring nations. Branding is to make a distinction between one brand and another. For Qatar, it is perhaps it’s ultimate struggle to differentiate and distinguish itself from its neighbouring countries.

One of Qatar’s headline soft power through investment in football strategies is the acquisition of, and post-acquisition operation of European giants, Paris Saint-Germain (PSG). It is almost impossible however to disconnect Qatar’s sports diplomacy strategies with PSG, from its strategies with BeIN Sports the broadcaster, along with being awarded World Cup 2022.  

The Qatari’s acquired PSG in a less than ideal state but have since managed to turn the club into one of the richest and most successful on the planet. PSG’s image remains a priority, because in turn it is seen that Qatar’s image is the beneficiary. The importance of this for Qatar might be best measured by the size of the spend on players since taking over the club. Putting the likes of David Beckham and Zlatan Ibrahimovic aside for the moment, PSG paid both the number one and number two world record transfer fees for Brazilian superstar Neymar (a reported 220 million Euro) and French wonderkid, Kylian Mbappe (a reported 180 million Euro). One media report said “The colossal Neymar deal, funded by Qatar Sports Investments, shows how far governments will go to secure global influence.” That article was headlined - “A £198m transfer is not about football. It’s about soft power”

Now consider the United Arab Emirates (UAE) and how it yields power through the following subsidiaries and stakes therein: Manchester City F.C. (100%), Melbourne City FC (100%), Montevideo City Torque (100%), Lommel S.K. (99%), New York City FC (80%), Mumbai City FC (65%), Girona FC (44.3%), Sichuan Jiuniu F.C. (29.7%), Yokohama F. Marinos (20%), Troyes AC (100%), City Football Academy, City Football Marketing, City Football Services, City Football Japan, City Football Singapore, City Football China, City Football India, CFG Stadium Group, Goals Soccer Centers.

Manchester City FC is certainly the golden child of the group and much like PSG for Qatar, the successful imagery around Manchester City cannot be disconnected from the desired branding in a global sense for the UAE. The growing list of investments of CFG highlights that the UAE is intent on soft power strategies and using sports diplomacy to brand itself widely as a legitimate and well organised nation. Was it a coincidence that just as the City Football Group was arranging its stake in the Chengdu based football club, Sichuan Jiuniu, the UAE’s national airline Etihad announced it “would be enhancing its links with Chengdu’s airport”? That is to say nothing of the Chinese investment into CFG.

Questions remain about whether these soft power strategies have been successful in light of for instance, the widely reported atrocious treatment and deaths of migrant workers in Qatar, or the ongoing reports of slavery in the case of the UAE. In an ugly sense, the success of the soft power investments of these nations in football, is whether they are loud enough to drown out the noise of the atrocities associated with their nations. The paradox for Qatar, is that before using football as a diplomatic tool and winning the right to host the World Cup, the exploitation of migrant workers was not making headlines. Ironically, it is this active use of football as a diplomatic instrument that has shone a light on the issue and effected Qatar’s image substantially.

Black and Peacock point out, when it comes to soft power sports diplomacy one ought to be aware that the values publicly portrayed and associated with an investment in football (i.e. success, courage, commerciality, aspiration) will often not be the actual values of a state but rather merely the values with which a state would preferred to be associated with to fulfil wider objectives.[5]

Investing for Company Branding: Red Bull

The other type of investment aimed primarily at improving the image of the investor (and not recouping a profit directly from the club as an entity) is company branding. In a way, it is the ultimate move of a sponsor, instead of paying an annual yearly contribution to the club, the sponsor takes control of the management of the club in order to maximise the image return for its brand. The paramount example of such a strategy is embodied by Red Bull’s investment in football clubs around the world. The regulatory complexities will be left for blog 2, but it is Red Bull’s stake and influence in four clubs (Red Bull Salzburg, RB Leipzig, Red Bull New York, Red Bull Brasil) that renders it the ultimate example of a company that found investing in football as way to brand at scale. Despite the success that Red Bull football clubs have experienced, sporting and commercial, the purpose for Red Bull investing in football is of course to further promote the brand and sell energy drinks.

Red Bull had previously and in a revolutionary way, tapped into branding via sport and had worked out a way to brand at large using the content production arm of the company. Utilising extreme sports, Red Bull campaigns focussed on associating itself with elite sport, perhaps thus conflating the alleged performance enhancing capabilities of its beverages or at least that its product was trendy and fashionable to drink in the context of sport.

When it came to football, Red Bull followed an ownership strategy rather than a traditional sponsorship method, opening up both the benefits of the ownership over traditional sponsorship models, and, the size, scale and reach of football as opposed to the more niche extreme sports.

Branding through football is seen as almost more covert, as the consumer is less aware that when they watch a branded club in a branded stadium, they are being advertised to;

“the consumer does not perceive that the content is branded. Sport content is predestined for branded entertainment. Engaging sports fascinate and attract people and have proven to be capable of transferring positive images… many niche sports still lack the attention of sport consumers or sponsors and are not covered extensively by the media. Branded entertainment, therefore, can provide niche sport enterprises, athletes, and teams as well as sponsors with consumer attention and prosumer engagement.”[6]

Conclusion & a note on Member Owned Clubs

Per the title of this blog, the typology of investors listed above is not exhaustive, though perhaps the most relevant as I segue into the regulations around multi club ownership. However, a short note on the membership model clubs is worthwhile. Member owned clubs still exist widely and some are in fact popping up in protest over a perceived hyper commercialisation of football. SV Austria Salzburg is a newer member owned club, established in response and in protest to the Red Bull ownership of the former SV Austria Salzburg, that Red Bull subsequently changed the name and colours of. Member owned clubs can be funded by paid memberships and more traditional revenue streams like ticket sales and sponsorship.  Control wise however, the members maintain the controlling stake and more importantly perhaps, the controlling vote. The hybrid model between private ownership and member ownership remains interesting, given what can be maintained in terms of history and culture, and what can be brought in in terms of commercial expertise and the reality that the need and desire for profits can drive success of a football Club.

As is hopefully apparent from the above, the types of investors and indeed the motivations come in all shapes and sizes. It is also worth pointing out, when it comes to the Private Equity groups and the nations and companies concerned with branding, the main reasons for investment does not render it the exclusive reason. Qatar will take the commercial benefits of PSG, BeIN sports and the World Cup. Part owners of CFG, China Media Capital/CITIC Capital (12%) and Silver Lake (10%) would not have invested with such alacrity based on the soft power strategies and state branding aspirations of the UAE, and rather those groups are of course more interested in the commercial benefits. Separate from selling more energy drinks than ever, Red Bull is undoubtedly pleased with taking RB Leipzig from the 5th tier to the Bundesliga, and now valued at EUR560 million, Red Bull has an extremely valuable asset. Likewise, the big funds and institutional players are aware of the positive branding that sport affords them when their football investments are successful.

In the next blog, I consider the current regulatory landscape regarding investment in football with a particular focus on regulations that address multi-club ownership.


[1] Marc Rohde and Christoph Breuer, “The market for football club investors: a review of theory and empirical evidence from professional European football Institute of Sport Economics and Sport Management”, (German Sport University Cologne, Köln, Germany) European Sport Management Quarterly, 2017 VOL. 17, NO. 3, 265–289.

[2] Ibid P267.

[3] Keith Dinnie, “Nation Branding, Concepts, Issues, Practices”, Butterworth-Heinemann, 2008.

[4] Romain Herbreteau, “The use of a football club as a means of state branding: The mixed results of Qatar’s promotion in France” Leiden University - Master Thesis, Master of Arts International Relations, Supervisor: Dr Camillo Erlichman (2018)

[5] David Black and Byron Peacock. "Sport and Diplomacy." Oxford Handbooks Online (2013) 1-21

[6] Reinhard Kunz & Franziska Elsässer & James Santomier, “Sport-related branded entertainment: the Red Bull phenomenon” (2016)  Sport, Business and Management: An international Journal, 6, 520-541.

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Asser International Sports Law Blog | RFC Seraing at the Court of Arbitration for Sport: How FIFA’s TPO ban Survived (Again) EU Law Scrutiny

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

RFC Seraing at the Court of Arbitration for Sport: How FIFA’s TPO ban Survived (Again) EU Law Scrutiny

Doyen (aka Doyen Sports Investment Limited) is nothing short of heroic in its fight against FIFA’s TPO ban. It has (sometimes indirectly through RFC Seraing) attacked the ban in front of the French courts, the Belgium courts, the European Commission and the Court of Arbitration for Sport. This costly, and until now fruitless, legal battle has been chronicled in numerous of our blogs (here and here). It is coordinated by Jean-Louis Dupont, a lawyer who is, to say the least, not afraid of fighting the windmills of sport’s private regulators. Yet, this time around he might have hit the limits of his stubbornness and legal ‘maestria’. As illustrated by the most recent decision of the saga, rendered in March by the Court of Arbitration for Sport (CAS) in a case opposing the Belgium club RFC Seraing (or Seraing) to FIFA. The arguments in favour of the ban might override those against it. At least this is the view espoused by the CAS, and until tested in front of another court (preferably the CJEU) it will remain an influential one. The French text of the CAS award has just been published and I will take the opportunity of having for once an award in my native language to offer a first assessment of the CAS’s reasoning in the case, especially with regard to its application of EU law.

 

I.               The facts and procedure of the case

To cut a relatively long story short, RFC Seraing [the variation of the name of the club remains a disturbing mystery in the various proceedings in Belgium and at FIFA] entered a TPO agreement with Doyen on 30 January 2015, stipulating that the club transfers the economic rights of three players to Doyen against a sum of €300.000. At that time the transitory phase of FIFA’s TPO ban enshrined in art. 18ter RSTP was already in force and the FIFA TMS, tasked with monitoring the enforcement of the RSTP, quickly jumped on the matter. The issue was referred to FIFA’s Disciplinary Committee, which opened on 2 July 2015 proceedings against RFC Seraing for breaching arts. 18bis and 18ter RSTP. Additionally, on 7 July 2015, Seraing introduced in the TMS a request to recruit a Portuguese player, to which it attached an ERPA (on Doyen’s ERPAs see our blog here) attributing 25% of the economic rights attached to the player to Doyen against a payment of €50 000. A few days after, the FIFA TMS started another investigation into the transfer and on 21 July 2015 the FIFA Disciplinary Committee extended the existing proceedings to also cover this matter.

On 4 September 2015, the Disciplinary Committee rendered its (unpublished) decision finding that ‘FC Seraing’ breached arts. 18bis and 18ter RSTP. Consequently, it banned the club from recruiting players (at national and international level) for the next four transfer windows and handed out a fine of CHF 150.000. Seraing challenged the decision with FIFA’s Appeal Committee, which decided on 7 January 2016 to reject the appeal and confirmed the original decision. Eventually, Seraing appealed this decision to the CAS, leading to the latest award. As a side note, it feels like the disputes involving RFC Seraing (or FC Seraing or Seraing United) are a set-up prompted by Doyen to be able to challenge the validity of art. 18ter RSTP in various jurisdictions. If it were true it should not affect the question of the legality of the ban, but it is probably not of great support to the credibility of some arguments raised by Doyen, or its alter ego Seraing, in these proceedings.


II.             The CAS’ assessment of the compatibility of FIFA’s TPO ban under EU law

As the competence of CAS in this matter was not contested, the key question was against which law(s) should the compatibility of FIFA’s TPO ban be assessed. Due to the history of RFC Seraing’s key lawyer, it is no surprise that much of the award is spent assessing the EU law compatibility of the ban. In the past, as I have argued elsewhere (my CAS and EU law article is accessible for free here, download it now!), the CAS has been rather reluctant to apply EU law rigorously. This case is therefore a great opportunity to assess whether it has raised its standards in this regard.

a.    The applicability of EU law

First, is EU law applicable to the case? The CAS has rarely applied EU law (the exception confirming the rule being the rather old CAS 98/200 case, which was later challenged in front of the EU Commission leading to the ENIC decision), an absurdity in light of the Bosman (and prior Walrave) case law of the CJEU, which made clear that EU law is applicable to the regulations of Sports Governing Bodies (SGBs), even when seated outside of the EU. Additionally, in light of the centrality of the free movement rights in EU integration, it is to be expected that like the EU competition rules they be considered part and parcel of a European public policy with which arbitral awards must comply to be recognized and enforced by national courts in the EU.

Thus, the less spectacular, but probably more important, aspect of the award is the clear affirmation that EU law is applicable because it constitutes a “mandatory provision of foreign law” in the sense of art. 19 of the Swiss Federal Act on Private International Law (PILA).[1] Mandatory provisions of foreign law must be taken into account when three cumulative conditions prevail:

  1. Such rules belong to a special category of norms which need to be applied irrspective of the law applicable to the merits of the case;
  2. there is a close connection between the subject matter of the dispute and teh territory where the mandatory rules are in force;
  3. in view of Swiss legal theory and practice, the mandatory rules must aim to protect legitimate interest and crucial values and their application must lead to a decision which is appropriate.[2]

In this case, the Panel considers that the three cumulative conditions are fulfilled because:

  1. EU competition law and EU provisions on fundamental freedoms are largely regarded as pertaining to the category of mandatory rules by courts and scholars within the EU;
  2. the close connections between (a) the territory on which EU competition law  and EU provisions on fundamental freedoms are in force and (b) the subject matter of the dispute results from the fact that the challenge against the legality of the RSTP has an obvious impact on the EU territory. Indeed, the RSTP aims to regulate the activity of football clubs, many of which are European. Furthermore, the particular decision affects the participation of RFC Seraing to competitions taking place on the European soil.
  3. Finally, the Swiss legal system shares the interests and values protected by EU law, specifically by the EU competition rules and EU fundamental freedoms.[3]

This is a strong confirmation that EU law (mainly EU free movement rights and EU competition law), which applies almost naturally to decisions and regulations of the SGBs[4], will always be deemed applicable if invoked in front of the CAS to challenge their legality. This, as Seraing has learned in the present instance, does not mean that the SGBs rules will be automatically found incompatible with EU law. Instead, it merely subjects them to a duty of justification and proportionality, which will be assessed on a case-by-case basis.[5] The message for sports lawyers appearing in front of the CAS is then: Work hard on your EU law! But don’t get your hopes up too high… 

b.    The compatibility of FIFA’s TPO ban with EU law

The rest of the CAS award is mainly dedicated to assessing the compatibility of the TPO ban with EU law.[6] In doing so, the CAS, rightly in my view, considered that the conditions regarding the compatibility, or not, of a private regulation of an SGB with the EU free movement rights and competition rules overlap with regard to the key question: the proportionality of the rule.

The legitimacy of the objectives of the TPO ban

The Panel’s assessment focuses firstly, and therefore mainly, on a possible disproportionate restriction of the free movement of capital guaranteed under art. 63 TFEU. The Panel decides to assume, without addressing it, that article 63 applies horizontally. This is still a widely uncharted territory and the CJEU has yet to take a clear stand on it. However, the CAS decided to be better safe than sorry and, thus, followed a maximalist interpretation of the scope of application of the article by applying it horizontally to the rules of FIFA. From the outset, it is uncontested that articles 18bis and 18ter RSTP constitute a restriction to the free movement of capital in the EU.[7] Yet, as emphasized by the Panel, a restriction does not entail an automatic incompatibility with EU law. Instead, the restrictive effect might be justified by a legitimate objective and compatible with EU law if the rule or measure is a proportionate mean to attain that objective. In the present case, FIFA invoked a number of potential legitimate objectives underlying the TPO ban:

  • The preservation of the contractual stability;
  • The preservation of the independence and autonomy of clubs in the management of their recruitment policy;
  • The securing of the integrity of football and preservation of the loyalty and equity of competitions;
  • The prevention of conflicts of interests and the securing of transparency in the transfer market.[8]

Those objectives remained uncontested by Seraing and the Panel concluded that they could be deemed legitimate in the sense of the CJEU’s jurisprudence.[9] Instead, Seraing tried to argue that the ‘real’ objective of FIFA in adopting the TPO ban was to ensure that the clubs monopolize the financial streams generated by the transfers of players.[10] Yet, it failed to provide the necessary evidence to convince the Panel, which insisted that “TPO has triggered amongst many commentators and inside the various instances and organisations of football intense worries to which the objectives invoked by FIFA are a response”[11]. Additionally, the Panel considers “that this practice gives way to numerous risks, in particular: risks linked to the opacity of investors escaping the control of football organizations and who are able to freely sell-on their investment; risks of a restriction of the economic freedom and rights of players, through the influencing with a speculative interest of their transfer; risks of conflicts of interests, or even of rigging or manipulation of games, contrary to the integrity of competitions, as the same investor can have TPO deals and multiples clubs involved in the same competition; risks linked to the ethics of sport because the objective pursued by investors is purely a financial and speculative one, to the detriment of sportive and moral considerations”.[12] Hence, the arbitrators buoyed the legitimacy of FIFA’s objectives in adopting the TPO ban.

The proportionality of the ban

The key question is then whether the FIFA ban can be deemed a proportionate means to attain its legitimate objectives. It is at this most crucial stage of the evaluation of the compatibility with EU law that a number of academic commentators have denied the ban’s proportionality.[13] It is the most important part of the award, which will be most likely scrutinized and attacked in follow-up cases in front of national or European courts. It is important to note that SGB regulations have never failed in front of the CJEU because they were lacking a legitimate objective, but rather because they were not considered adequate or necessary to attain their objectives. This stage of the analysis entails political considerations and a comparative analysis of the policy alternatives (and their feasibility) available to tackle a specific problem. In other words, it is not sufficient to claim that you can think in the abstract of a less restrictive alternative, you need to factually demonstrate that this less restrictive alternative is a credible candidate to attain the objective. This is obviously a difficult task for a lawyer. Furthermore, procedural considerations connected to the rulemaking process will come into play. If a sporting rule has been devised via an inclusive legislative procedure and finds broad support amongst the affected actors, then it will in turn be more likely to be deemed proportionate. Instead, if a rule is the result of a secretive, exclusive and authoritarian procedure, then it will be easier to challenge its proportionality. Thus, both substantial (effects-based) and procedural (legitimacy-based) considerations are key to evaluate the proportionality of the TPO ban.

The Panel insists first that the TPO ban has limited effects on the freedom to invest in football. Indeed, it finds that investors are not barred from investing in clubs or to finance specific operations (such as transfers), the ban is devised only to exclude certain types or modalities of investing.[14] On the procedural/legislative side, the Panel notes that the ban has been introduced after a broad consultation and on the basis of numerous, though unpublished, expert reports.[15] This positive assessment of the adoption process could be contested, especially because FIFA did not release the expert reports to the public, which were therefore not subjected to the critical scrutiny of their peers.  Moreover, the Panel takes due note of the relatively long experimentation of a lighter measure (article 18bis RSTP), which has proven inefficient to control the widespread recourse to TPO.[16] The question was then whether Seraing would be able to come up with a credible less restrictive alternative to rein the anarchic use of TPO in football. The Belgian club claimed that FIFA’s legitimate objectives could have been attained through regulation and measures improving transparency (very similar to La Liga’s argument here).[17] Nonetheless, the arbitrators noted that Seraing failed to specify the alternative measures it envisaged.[18] Instead, the Panel sided with FIFA in finding that it lacks the capacity and legal competence to properly police investors which are not subjected contractually to its disciplinary power.[19] In such a context, the Panel finds that the risks of conflicts of interests stemming from TPO contracts cannot be properly controlled by FIFA and the national federations, and the alternative measures proposed by Seraing are bound to fail.[20] Finally, the Panel also referred to the previously existing bans in France, England and Poland, insisting that FIFA was also aiming at harmonizing the rules applicable to the transfer market in Europe to alleviate any potential discrimination.[21] Hence, the arbitrators conclude that the ban is a proportionate restriction to art. 63 TFEU and compatible with EU law. While the Panel doubts that the TPO ban has substantial restrictive effects on the free movement of players and on the freedom to provide services of agents,[22] in any case it refers to its findings under art. 63 TFEU to conclude that it must be held proportionate.[23]

Regarding the compatibility of the ban with EU competition law, Seraing argued that it constitutes an unlawful restriction to free competition under article 101 TFEU and an abuse of a dominant position under article 102 TFEU. The CAS deemed (uncontroversially) FIFA an association of undertaking for the purpose of article 101 TFEU and recognized that the TPO ban affects trade between the Member States.[24] However, the arbitrators emphasized that Seraing bears the burden of proving that the ban constitutes a restriction by object or effect of free competition in the internal market.[25] In that regard, the CAS referred to the CJEU’s analytical framework developed in its Wouters case.[26] It concluded, referring to its previous holdings, that the ban had legitimate objectives and was necessary to attain them, and therefore did not constitute a restriction in the sense of article 101 (1) TFEU. As far as the abuse of a dominant position is concerned, after criticizing the lack of serious economic analysis by the appellant,[27] the Panel simply reiterated its previous findings regarding the legitimate objectives and proportionality of the ban.[28] 

The CAS swiftly rejected all the other arguments raised by Seraing on the basis of the EU’s Fundamental Rights Charter,[29] the European Convention of Human Rights,[30] and Swiss law.[31] Nonetheless, it did held that the sanction imposed on Seraing by the FIFA Disciplinary Committee was too stringent in light of the proportionality principle and reduced Seraing’s transfer ban to three windows and a fine of CHF 150.000.[32]

 

III.           Conclusion

Doyen lost a new battle and, while the war is still raging on, the controversial company is slowly starting to run out of legal ammunitions to challenge FIFA’s TPO ban. I have explained elsewhere why I believe the ban to be compatible with EU law and many of the arguments of the CAS in this award resonate with my own views.  Yet, though I think banning TPO is a step in the right direction to a healthier transfer market, I also believe that FIFA is artificially sustaining a transfer market that leads to the shadowy financiarization of football brutally exposed in the recent football leaks. In other words, the fact that a challenge against articles 18bis or 18ter fails does not mean that the whole RSTP is compatible with EU law, and for various reasons I believe that the current article 17RSTP is likely to fall foul of the EU internal market rules.[33]

The broader lesson of this TPO saga is that EU law is (at last) becoming a potent tool to challenge SGBs and their rules at the CAS. However, EU law is not blind to the necessary regulatory function they exercised vis-à-vis transnational sporting activities. What EU law targets is the SGBs’ illegitimate, disproportionate, and abusive regulatory behaviour to the detriment of the affected actors. When invoking EU law, sports lawyers must be aware of the need to show concretely the disproportionate nature of the rule or decision challenged. This is a heavy evidentiary burden. In other words, one cannot be satisfied with simply pointing out a restrictive effect, instead an interdisciplinary engagement with the economic and social effects of a regulation as well as with its legislative process is in order.

On a final note, I am truly pleased to see that the CAS is finally taking EU law a bit more seriously. This is a giant step forward, which will protect its awards from challenges in front of national courts, foster its reputation in Europe’s legal communities, and empower it as a counter-power inside the system of the lex sportiva. I urge the CAS to fully embrace this change and to continue to thoroughly assess the EU law compatibility of the sporting rules challenged in front of it. In this regard, it should keep in mind that the more these rules are the result of a deliberative and inclusive (in a way democratic) transnational legislative process, the more they can be deemed legitimate in the eyes of EU law…and vice versa.


[1] TAS 2016/A/4490 RFC Seraing c. FIFA, 9 mars 2017, para. 73 : « La Formation arbitrale considère que le droit de l’Union Européenne (« droit de l’UE »), dont notamment les dispositions des traités en matière de liberté de circulation et de droit de la concurrence, doivent être prises en compte par la Formation arbitrale, dans la mesure où elles constituent des dispositions impératives du droit étranger au sens de l’article 19 de la Loi fédérale sur le droit international privé du 18 Décembre 1987 (« LDIP »).

[2] This English translation is taken from CAS 2016/A/4492 Galatasaray v. UEFA, 23 juin 2016, para. 43.

[3] TAS 2016/A/4490 RFC Seraing c. FIFA, para. 76. The French version reads as follows :

i.       Les dispositions de droit européen, concernant notamment le droit de la concurrence et les libertés de circulation, sont communément considérées comme des règles impératives par les juridictions de l’Union et la doctrine ;

ii.     Les relations étroites entre (a) le territoire sur lequel le droit européen est en vigueur et (b) l’objet du litige, tiennent au fait que la mise en cause de la légalité du RSTJ a un impact évident sur le territoire européen. En effet, le RSTJ vise à réguler l’activité des clubs de football, dont de nombreux clubs européens. De plus, la Décision attaquée affecte notamment la participation du RFC Seraing à des compétitions se déroulant sur le sol européen.

iii.    Enfin, l’ordre juridique suisse partage les intérêts et valeurs protégées par le droit européen et notamment les dispositions de droit européen en matière de droit de la concurrence et de libertés de circulation.

[4] See B. van Rompuy, The role of EU Competition Law in Tackling Abuse of Regulatory Power by Sports Associations. In general, see S. Weatherill, European Sports Law, Asser Press, 2014. For my take on the centrality of EU law to exercise a ‘counter-democratic’ check on the lex sportiva, see my PhD thesis (in French) available here.

[5] See crucially CJEU, Meca Medina, 18 July 2006, ECLI:EU:C:2006:492, para.42.

[6] See TAS 2016/A/4490 RFC Seraing c. FIFA, paras 90-144

[7] Ibid., para.97.

[8] Ibid., para 101. En l'espèce la FIFA invoque plusieurs objectifs poursuivis par les mesures en cause, et qu’il convient de reprendre : la préservation de la stabilité des contrats de joueurs , la garantie de l'indépendance et l'autonomie des clubs et des joueurs en matière de recrutement et de transferts, la sauvegarde de l'intégrité dans le football et du caractère loyal et équitable des compétitions, la prévention de conflits d'intérêts et le maintien de la transparence dans les transactions liées aux transferts de joueurs.

[9] Ibid., paras 102-104.

[10] Ibid., paras 105-106.

[11] Ibid. para. 107.

[12] Ibid., para.108.

[13] See J. Lindholm, Can I please have a slice of Ronaldo? The legality of FIFA’s ban on third-party ownership under European union law and S. Egger, Third-party Ownership of Players’ Economic Rights und Kartellrecht, in K. Vieweg, Inspirationen des Sportrechts, Duncker & Humblot, Berlin, 2016, pp.307-331.  

[14] TAS 2016/A/4490 RFC Seraing c. FIFA, paras 109-112

[15] It refers to “une phase significative d’étude, de consultation, de travaux et discussions à laquelle ont participle de nombreux interlocuteurs”, at Ibid., para.113.

[16] Ibid., para.114.

[17] Ibid., para. 116.

[18] Ibid.

[19]“La FIFA ne peut pas contrôler les intérêts de personnes qui ne lui sont pas affiliées, ni les contrats qui sont conclus à l'occasion ou à la suite de transferts par d'autres personnes que les clubs, joueurs et agents et dont la déclaration est obligatoire via le TMS.” Ibid., para.117.

[20] Ibid., para.118.

[21] Ibid., para. 120.

[22] Ibid., paras 125-127.

[23] Ibid., para. 128.

[24] Ibid., para. 135.

[25] Ibid., para. 137.

[26] Ibid., para. 138.

[27] Ibid., para. 142.

[28] Ibid., para. 143.

[29] Ibid., paras 145-148.

[30] Ibid., paras 149-151.

[31] Ibid., paras 152-161.

[32] Ibid., paras 167-179.

[33] On this see R. Parrish, Article 17 of the Fifa Regulations on the Status and Transfer of Players : Compatibility with EU Law and G. Pearson, Sporting Justifications under EU Free Movement and Competition Law: The Case of the Football ‘Transfer System’.

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