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Season 2 of football leaks: A review of the first episodes

Season 2 of #FootballLeaks is now underway since more than a week and already a significant number of episodes (all the articles published can be found on the European Investigative Collaborations’ website) covering various aspect of the (lack of) transnational regulation of football have been released (a short German documentary sums up pretty much the state of play). For me, as a legal scholar, this new series of revelations is an exciting opportunity to discuss in much more detail than usual various questions related to the operation of the transnational private regulations of football imposed by FIFA and UEFA (as we already did during the initial football leaks with our series of blogs on TPO in 2015/2016). Much of what has been unveiled was known or suspected by many, but the scope and precision of the documents published makes a difference. At last, the general public, as well as academics, can have certainty about the nature of various shady practices in the world of football. One key characteristic that explains the lack of information usually available is that football, like many international sports, is actually governed by private administrations (formally Swiss associations), which are not subject to the similar obligations in terms of transparency than public ones (e.g. access to document rules, systematic publication of decisions, etc.). In other words, it’s a total black box! The football leaks are offering a rare sneak peak into that box.

Based on what I have read so far (this blog was written on Friday 9 November), there are three main aspects I find worthy of discussion:

  • The (lack of) enforcement of UEFA’s Financial Fair Play (FFP) Regulations
  • The European Super League project and EU competition law
  • The (lack of) separation of powers inside FIFA and UEFA

I.               The Financial Fair Play and Legal Realism: The (wide) gap between the law in books and the law in action 

In a famous article dating back to 1910, Roscoe Pound coined the distinction between law in books and law in action. It highlighted an obvious (but often underestimated) fact: laws do not speak by themselves. Moreover, laws are never clear, as they must be interpreted in the context of concrete cases. Until now, much of the second season of the football leaks was dedicated to UEFA’s lenient enforcement of its FFP rules against numerous clubs (in particular Manchester City and PSG). In other words, to the (wide) gap between the law in books and the law in action. What becomes clear from the articles devoted to this topic (see here, here and here) is that the UEFA FFP rules are far from clear and that the certain clubs were very creative in devising ways to play with the boundaries of the wording of the rules.

These clubs have used various stratagems (mainly inflated sponsorship agreements, but not only) to try to convince UEFA that they complied with the rules. However, the leaks demonstrate that they did not manage to fool the governing body, which had many reports on its desk identifying the immense gap (1 to 100) between independent valuations of the deals and their face value. In short, UEFA knew it was being played and that in particular PSG and Manchester City were playing with the interpretative frontiers of the FFP rules in order to circumvent them (or at least their spirit) in a not-so-subtle way. Yet, the practical meaning of the law in books always depends on those that guide the law in action, that’s why the independence and transparency of judicial institutions (such as the UEFA Club Financial Control Body (CFCB)) is so important. In the case of UEFA’s CFCB, the football leaks show that the settlements reached with the clubs in spring 2014 were primarily the result of a political decision, driven by the then UEFA Secretary General (Gianni Infantino), who saved PSG and Manchester City by reducing their break-even deficits through a gigantic overvaluing of their sponsorship contracts. Whether this decision is in line with the spirit and objectives of the UEFA CL & FFP Regulations is highly doubtful. Moreover, it seems legitimate for other clubs (such as Galatasaray or Dynamo Moscow), which have faced harsher sanctions, to feel that they have been discriminated against. Until now, due to the lack of detailed information available on the underlying financial situations in specific cases, this was particularly difficult to evidence. The football leaks have brought some transparency and certainty to this matter, and other clubs facing UEFA sanctions on the basis of FFP breaches will certainly rely on it in the future. Hence, these revelations damage UEFA’s reputation as a serious and equitable governing body and its portraying of the FFP rules as a tremendous success.

The football leaks do not, however, touch upon the issue of the legality of the FFP rules, a mechanism that fundamentally aims to restrain the capacity of owners to use financial leverage to boost their clubs. But, why should wealthy owners of PSG and Manchester City not be allowed to use their billions to help their clubs win the Champions League? It might be a bad economic investment or the returns in terms of positive PR might not materialise as expected, but this is rather a problem for the citizens of Qatar and the United Arab Emirates who are burning their oil & gas resources on it. In fact, nobody thinks of stopping Tesla from investing mountains of cash until now at huge loss (the same is true for Uber). Moreover, the FFP rules, if properly enforced, would primarily freeze the existing inequalities and reinforce the grip of a small group of dominant clubs on national and European club competitions. Maybe it is actually a good thing that UEFA is not taking them seriously (here speaks the PSG fan in me). Nonetheless, I (the reasonable academic) personally believe that there is a viable justification for the UEFA FFP rules and it is to protect football (and its adjacent markets) from speculation and to put a brake on the tendency of the owners to irrationally overinvest. In other words, the rules play a necessary counter-cyclical role. Without them the drive for short term success would fuel not only the deregulated transfer market but also put the long-term existence of football clubs at risk (and they are often too popular to fail). However, it must be complemented with other regulatory mechanisms if the widening inequality between clubs in Europe is to be corrected. On this too, the football leaks had very interesting things to show.

II.             The Super League and EU law: Leveraging competition law against free and fair competition

« In view of the considerable social importance of sporting activities and in particular football in the Community, the aims of maintaining a balance between clubs by preserving a certain degree of equality and uncertainty as to results and of encouraging the recruitment and training of young players must be accepted as legitimate. » (Bosman ruling, para. 106)

There is healthy amount of legal irony in the football leaks story (see here) about the projected European ‘Super League’. It seems a group of major clubs have relied on legal advise based on EU competition law to push forward a scheme to breakaway from the football plebs and devise a new, more lucrative, and most importantly exclusive competition. Whether they truly planned to go ahead or needed the plan to look as credible as possible to strengthen their hand in the discussions with UEFA on reshaping the Champions League is moot. The point is that they have in practice leveraged EU competition law to reduce competitive balance and secure their collective dominance vis-à-vis their national/European competitors. Here comes the million-dollar question: How come EU competition law can be exploited to reduce competition?

This is in my view largely due to a widespread misinterpretation of the impact of EU law on SGBs’ regulations. Be it under the free movement or the competition rules, the EU welcomes private regulations through SGBs but exercises a rationality test on them: SGBs must demonstrate that their rules and decisions pursue a legitimate objective (not limited to their economic well-being) and are reasonable (or proportionate) to attain that objective. In other words, they must demonstrate what they often publicly claim, that they are acting for the public good when regulating their sport. In practice, it means that if you threaten a speed-skater with a lifelong ban for participating in non-sanctioned events that do not even conflict with your own competitions, you need to explain why and show that the chosen regulatory option is not too harsh on the speed skater. This is roughly the situation in the ISU case, in which the EC found the ISU eligibility rules to be contrary to EU competition law because of two main reasons. First, the ISU did not provide any convincing justifications for its threat of a lifelong ban on skaters taking part in unsanctioned events. Moreover, and most importantly, the lifelong ban was a disproportionate mean to attain any potentially legitimate aim, e.g. a solidarity contribution or a shorter ban could have constituted less restrictive alternatives. This does not mean, however, that UEFA and FIFA could not for example justify a temporary ban from national teams (and thus from the FIFA World Cup or UEFA European Championship) for players taking part in the Super League or exclude temporarily clubs taking part in the Super League from national competitions and/or fine them. If these measures are necessary to maintain the competitive balance or preserve the solidarity mechanisms inside the football pyramid, they might very well be justified. It is important to remember here that AG Lenz was in §§ 218-234 of his Opinion in the Bosman case advocating redistributive measures (in particular the equal distribution of TV rights) which are extremely restrictive of the economic freedom of the clubs. his proposals were endorsed by the Court of Justice in paragraph 110 of its final Bosman judgment.

In short, it is erroneous to believe (as so many do) that EU law supports and encourages the economically selfish behaviour of the biggest clubs. The opposite is true: EU law recognises the need for competitive balance and redistribution in sport and it is also ready to accept the legitimacy of the SGBs’ regulations. The irony illustrated by the football leaks is that EU law is being invoked by a cartel of powerful clubs to entrench their dominant position in the European football market. Such a twisted use of EU law would not stand the whisper of a chance at the CJEU.

III.           Infantino and the Separation of Power at FIFA and UEFA: The ills of executive dominance in football

Finally, if there is a governance red thread throughout the information published in the framework of the football leaks, it is the extent to which they illustrate the dominance of executives in the governance of football (and sports in general). Both at the UEFA and FIFA, Gianni Infantino, like Blatter a pure product of the football bureaucracy and an impersonation of its profound Swiss roots, routinely intervened in the work of pseudo independent bodies. Thus, as mentioned above, he was personally and directly involved in the negotiations with PSG and Manchester City over their compliance with the UEFA FFP rules. Assuming that the email exchanges reported are true, he is the one who struck a deal with both clubs leading to a settlement of the cases and not the ‘independent’ investigator of the UEFA CFCB. This obviously damages the integrity of the CFCB and hints at the discretionary nature of its decision-making contrary to a basic principle of the rule of law: equality before the law. 

Another example of the lack of separation of powers inside FIFA and UEFA, despite powers being officially separate on paper, is the drafting process of the newly released FIFA Code of Ethics. The Ethics Committee can propose amendments of the Code of Ethics to the FIFA Council (Article 54 FIFA Statutes 2018). The executive bodies of FIFA, which are the prime addressees of the Code, are not supposed to have a say in the substance of these amendments. However, in practice, the emails obtained by the football leaks show that Infantino did not only receive a copy of the draft, but also provided comments and suggestions, which were mostly adopted. Again this process highlights a core governance failure at FIFA, already displayed through its policy of hiring and firing independent ethics staff and the consequent lack of truly independent counter-powers to the massive executive powers of the President. As long as no Chinese wall is erected between the executive bodies of FIFA/UEFA and their judicial bodies (including the CAS), we will continue to see instances of maladministration and abuses of power in football. Their independence must be secured through institutional guarantees such as strict conflict of interests rules and secured term limits, as well as a much greater transparency of the proceedings including the systematic publication of the full disciplinary decisions.

Conclusion: The public virtue of the leak

'Without publicity, no good is permanent; under the auspices of publicity, no evil can continue.' (Jeremy Bentham in Essay of political tactics)

The revelations of the football leaks will not come as a major surprise to those following football. Many suspected that PSG and Manchester City were getting quite a good deal at UEFA’s CFCB, many could well imagine that the big clubs strong-armed UEFA into a new Champions League set-up with a threat of breaking away, and many guessed that Infantino was exercising pressure and influence over ‘independent’ bodies at FIFA and UEFA. Yet, few could prove it. Thus shielding UEFA, FIFA, the major clubs and Infantino from well-deserved public criticisms. Now, the public knows. We (the people of football) can decide how we want football to be regulated and by whom. Miguel Maduro, the ephemeral former head of FIFA’s Governance Committee, who was dismissed after barring Russia’s deputy prime minister, Vitaly Mutko, from taking a position at the FIFA Council, has suggested (in a must-watch talk he gave at the Asser Institute during #ISLJConf17) that we need a specific EU agency to oversee the governance of UEFA and FIFA. It is an idea worth exploring, which will require a lot of political capital and determination to be implemented. This political will can only be marshalled if the public loudly demands change. In this regard, I’m not sure whether this round of football leaks will suffice, but it will highlight again how football is currently run by organisations and people which are disregarding all basic principles of decent governance, often with nothing else in mind than their own economic interests. This is not a natural and permanent state of affairs. It can change. It will change.

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