In 2009, Sepp Blatter expressed his concerns that half of the players participating in the 2014 FIFA World Cup would be Brazilians naturalized by other countries. The Official list of Players released a few weeks ago tends to prove him wrong[1]. However, some players have changed their eligibility in the past and will even be playing against their own country of origin[2]. This post aims at explaining the key legal aspects in changes of national affiliation and to discuss the regulations pertaining to the constitution of national sides in general[3].

The 32 national associations engaged in the final competition are bound by two sets of rules, namely the Regulations of the 2014 World Cup – Brazil and the Regulations Governing the Application of the FIFA Statutes 2013[4]. Their common purpose is to ensure that players have a genuine, close and credible link with the national association which selects them on its roster[5]. This is primarily ensured by the permanent holding of the nationality of the country of the national association in question[6]. It means that nationality must not be pegged to the residence of the player in a certain country[7]. Naturally, sanctions may apply in the case of a breach of these stipulations[8].

The global race to secure talent meeting this nationality requirement is not new. It appears that it has however reached a new level in light of the Diego Costa case since FIFA regulations do not prevent nor address the issue of dual call-up[9]. Many players, such as Manchester United midfield Adnan Janujaz (who actually just elected to play for Belgium a few weeks ago)[10], are placed in a difficult if not untenable position. They are indeed denied the right to refuse an international selection according to FIFA regulations even if they are called-up by both national teams they are affiliated to[11].

The recent Diego Costa saga put this issue under intense media scrutiny[12]. To summarize the issue, the Brazilian-born player had gained very few international appearances in the preliminary phase, playing exclusively friendlies for his country of birth, before acquiring Spanish nationality and moving to represent Spain at the 2014 FIFA World Cup. His choice was portrayed as traitorous by some officials of the Brazilian football federation. In light of this, imagine for one second the headlines of the worldwide press if Diego Costa had defeated Brazil during the knockout phase (28 or 29 June) or the grand final on 13 July 2014, if both teams had qualified for the second phase of the tournament. In the eyes of many, FIFA is responsible for allowing Diego Costa to play against his country of birth. However, this is overlooking that the acquisition of a new nationality and change of national associations are strictly regulated, and that such regulations are actually decided collectively by the members of FIFA. In this respect, it should be mentioned that the Brazilian Football Federation has not made any official move to modify the rules so far[13].

Acquisition of a new nationality

Article 7 of the 2013 FIFA Regulations reads as follow: “Any Player who refers to art. 5 par. 1 to assume a new nationality and who has not played international football in accordance with art. 5 par. 2 shall be eligible to play for the new representative team only if he fulfils one of the following conditions: a) He was born on the territory of the relevant Association; b) His biological mother or biological father was born on the territory of the relevant Association; c) His grandmother or grandfather was born on the territory of the relevant Association; d) He has lived continuously for at least five years after reaching the age of 18 on the territory of the relevant Association”.

Under this article, the acquisition of a new nationality must be distinguished with double nationality. Dual nationals by birth may elect to represent the national association of their choice. This is notably the case of football players born in Northern Ireland for instance[14]. They can play for the Irish Football Association (Northern Ireland) or the Football Association of Ireland (Ireland) as they can claim British and Irish nationalities at birth[15]. Of note, this article applies only to player who have acquired a new nationality before their first international appearance. If this is not the case, they will not be allowed to play for their new country. 

The “granny rule” and the five-year waiting period are the most controversial eligibility regulations. Some authors find indeed that gaining eligibility through a grandparent does not offer a link close enough with the country that the player wishes to represent. Consequently, they advocate that this provision be deleted from the FIFA regulations[16]. The waiting rule was introduced in order to protect national identity and young players[17] and thus, to prevent expedited naturalization of football players. It institutes a de facto prohibition to play at international level before the age of 23 years old when naturalized. This rule was challenged twice since its coming into force in 2008. First, the United Arab Emirates (UAE) Federation and the Australian Federation sought laxer rules in order to include immigrant players in their national side. The FIFA Congress rejected this bid by 153 to 42 votes and the second submission for a change was even withdrawn before being put to vote[18]. This landslide vote shows that FIFA members are favoring the status quo.

Change of association

Article 8, paragraph 1, of the 2013 FIFA Regulations reads as follow: “If a Player has more than one nationality, or if a Player acquires a new nationality, or if a Player is eligible to play for several representative teams due to nationality, he may, only once, request to change the Association for which he is eligible to play international matches to the Association of another Country of which he holds nationality, subject to the following conditions: a) He has not played a match (either in full or in part) in an Official Competition at “A” international level for his current Association, and at the time of his first full or partial appearance in an international match in an Official Competition for his current Association, he already had the nationality of the representative team for which he wishes to play; b) He is not permitted to play for his new Association in any competition in which he has already played for his previous Association”

Appropriately seeking to balance the interests involved, this rule serves to monitor change of eligibility and protect the integrity of international competitions while respecting the rights of players to move from one country to another[19]. FIFA did not monitor such changes until the mid-1960s[20]. The world governing body for football introduced at that time the concept of an election of nationality and banned change of national association until 2003.

The FIFA Congress introduced a limited right to change national affiliation but it was first reserved for U-23 players only[21]. In 2008, FIFA extended this right to any player provided that they were dual nationals when they had played for their first country and had not played in an Official Competition at “A” level (i.e. with the first team of a national association)[22]. The chart indicates that the number of requests to change association increased dramatically after 2008. However, it has now stabilized at approximately 30 requests per year. In this respect, the 2014 FIFA World Cup does not seem to have had any effect compared to the 2010 edition combined with the new set of rules.

To date, 237 players have taken the opportunity to change national affiliation and 24 of them are currently participating in the 2014 FIFA World Cup. This represents approximately 10.10% of the 237 players and only 3.26% of the 736 players engaged in the competition. This figure is line with the 2004 Athens Olympics Games for instance where 2.6% of the athletes had change their sporting nationality[23]. It shows that the concerns of Sepp Blatter have not materialized and that the situation is currently under control. Therefore, there is certainly no urgent need to further strengthen the existing regulatory framework.

[1]For a mapping of ancestral and international connections between teams, see: Brazil 2014: Visualising ancestral and international connections between teams (http://codehesive.com/wc-ancestry/).

[2] If he had been fielded, Eduardo Alves da Silva would have been the first to play against his country of birth during the opening match (Brazil – Croatia: 2 – 1).

[3] This post will not address the issue of shared nationalities (art. 6 Regulations Governing the Application of the FIFA Statutes 2013) and change of association due to states authorities nor its process (art. 8 par 2 and 3 Regulations Governing the Application of the FIFA Statutes 2013).

[4] Available at FIFA.com.

[5] McCutcheon, National eligibility rules after Bosman, in: Professional Sport in the EU: Regulation and Re-regulation TMC Asser Press (Den Haag) p. 127.

[6] Article 5 par. 1 Regulations Governing the Application of the FIFA Statutes 2013.

[7] Article 5 par. 1 Regulations Governing the Application of the FIFA Statutes 2013.

[8] Fielding an ineligible player is sanctioned by the mandatory forfeiture of the game and a CHF 6’000 fine (article 8 par. 3 the Regulations of the 2014 World Cup – Brazil and article 31 FIFA Disciplinary Code).

[9] A situation of dual call-up may occur when a player, dual national and who has not elected a sporting nationality, is called by both associations he belongs to. This raises the issue of the right to refuse an international selection.

[10] According to the project Brazil 2014: Visualising ancestral and international connections between teams, Adnan Janujaz is the most connected player.

[11] Article 3 par. 1 – Annexe 1 – Regulations on the Status and Transfer of Players 2012.

[12] See for example: Páez Romero, Regulations: Player eligibility: the Diego Costa case, in: World Sports Law Report, Vol. 12 issue 1 (January 2014); Margaritis, The Dynamics of nationality and football, in: LawInSport, 28 April 2014; Lovatt, Changing nationality in football: the FIFA rules that helped Brazilian Diego Costa play for Spain, in: LawInSport, 4 November 2013.

[13] This is probably due to the fact that the Brazilian Football Federation has lost only one player to the current FIFA regulations. It should be noted that Brazilian players who have never been selected nor have played in friendlies are not cast by FIFA statistics on change of eligibility.

[14] Hafner, La qualification des joueurs en équipe représentative au regard de la réglementation de la FIFA : le cas de la Coupe du monde 2010, n° 35.

[15] Cf. CAS 2010/A/2071 Irish Football Association v/ Football Association of Ireland, Daniel Kearns and FIFA, award of 27 September 2010.

[16] For instance: Hall, Fishing for All-Stars in a Time of Global Free Agency: Understanding FIFA Eligibility Rules and the Impact on the U.S. Men’s National Team, in: Marquette Sports Law Review, Vol. 23 Issue 1, p. 205.

[17] FIFA Congress 2011 – Minutes, p. 64.

[18] FIFA Congress 2011 – Minutes, p. 64 and FIFA Congress 2013, Minutes, p. 85.

[19] McCutcheon, National eligibility rules after Bosman, in: Professional Sport in the EU: Regulation and Re-regulation TMC Asser Press (Den Haag) p. 138. A general prohibition of change eligibility is likely to be deemed illegal. Cf. Oswald, First conclusions of the lecturers, in : La nationalité dans le sport : Enjeux et Problèmes, Editions CIES (Neuchâtel) 2006, p.201.

[20] Hall, Fishing for All-Stars in a Time of Global Free Agency: Understanding FIFA Eligibility Rules and the Impact on the U.S. Men’s National Team, in: Marquette Sports Law Review, Vol. 23 Issue 1, p. 194. Van den Bogaert, Practical Regulation of the Mobility of Sportsmen in the EU post Bosman, p. 348.

[21] Hafner, La qualification des joueurs en équipe représentative au regard de la réglementation de la FIFA : le cas de la Coupe du monde 2010, n° 44.

[22] Hafner, La qualification des joueurs en équipe représentative au regard de la réglementation de la FIFA : le cas de la Coupe du monde 2010, n° 45.

[23] Poli/Gillon, La naturalisation de sportifs et fuite des muscles. Le cas des Jeux Olympiques de 2004, in : La nationalité dans le sport : Enjeux et Problèmes, Editions CIES (Neuchâtel) 2006, p. 59.

UEFA announced on 8 May that it had entered into Financial Fair Play settlement agreements with 10 European football clubs. Together with the four other agreements made in February 2015, this brings the total to 14 FFP settlements for 2015 and 23 since UEFA adopted modifications in its Procedural rules and allowed settlements agreements to be made between the Clubs and the Chief Investigator of the UEFA Club Financial Control Body (CFCB).[1] 

In the two years during which UEFA’s FFP regulations have been truly up and running we have witnessed the centrality taken by the settlement procedure in their enforcement. It is extremely rare for a club to be referred to the FFP adjudication chamber. In fact, only the case regarding Dynamo Moscow has been referred to the adjudication chamber. Thus, having a close look at the settlement practice of UEFA is crucial to gaining a good understanding of the functioning of FFP. Hence, this blog offers a detailed analysis of this year’s settlement agreements and compares them with last year’s settlements.

The two tables below provide an overview of last year’s nine settlement agreements (table 1) and this year’s settlement agreements (tables 2 and 3).  

Table2014.jpg (310KB)

Table2015(1).jpg (259.6KB)

Table2015(2).jpg (228.4KB)

DIFFERENCES WITH LAST YEAR’S SETTLEMENTS

The financial contribution (fines)

In 2015, the financial “sanctions” have been much lower than last year, especially with regard to the highest penalties. In 2014, Paris Saint-Germain and Manchester City agreed to pay an overall of €60 million (€40 million, subject to the fulfilment of the conditions imposed by UEFA to the club). This year, the two highest financial contributions will be those of FC Internazionale (€20 million) and AS Monaco (€13 million). Moreover, the contributions imposed on FC Internazionale and AS Monaco have a conditional element: should the clubs fulfil UEFA’s requirements, they will get €14 million and €10 million returned to them respectively.

Last year, the revenues derived by the clubs from participating in European competitions were withheld by UEFA in every settlement agreement. However, this year, UEFA will withhold revenue from the UEFA competitions in only some cases, namely for FC Krasnodar, FC Lokomotiv Moscow, Besiktas, AS Roma, AS Monaco and FC Internazionale.

Moreover, another difference concerns the way the club may pay the ‘conditional amount’ provided in the settlements. Last year, the conditional amounts were “withheld and returned” to the club, provided it fulfilled the “operational and financial measures agreed with the UEFA CFCB”. This year, however, these conditional amounts “may be withheld in certain circumstances depending on the club’s compliance”. This means that there is no a priori retention of the money by UEFA that is subject to the achievement of the objectives agreed.  

The deficit limits

As can be seen from the tables above, UEFA limits the total deficit that clubs are allowed to have. The clubs must comply with this UEFA obligation for one or two seasons, depending on the settlement agreement. This condition was imposed in both the 2014 and 2015 agreements. Yet, some differences arise with regard to the deficit allowed for clubs.

These differences become apparent when comparing FC Rubin Kazan (2014) with AS Roma (2015). Both clubs agreed to a three seasons duration of the settlement, a €6 million fine, a reduction of the squad (22 players for AS Roma and 21 for FC Rubin Kazan), and a limitation on the number of player registrations. However, the maximum allowed deficit for each club is different. As regards AS Roma, UEFA restricted the deficit authorized to €30 million. It should be noted that, according to UEFA’s own regulations, the maximum acceptable deviation is €30 million.[2] In other words, this is not a real sanction imposed on AS Roma, since every European club has the duty to comply with the maximum acceptable deviation rule. In its agreement with FC Rubin Kazan, on the other hand, UEFA imposed a deficit limit of €30 million for the first season and full break-even compliance for the following season. This is a harsher sanction than in the agreements found in 2015, in which a specific deficit is permitted for the second season of the settlements (see the FC Krosnodar, AS Roma, Besiktas and AS Monaco agreements).    

The salary cap

This salary cap measure is regulated in Article 29(1)(g) of the Procedural Rules Governing the UEFA Club Financial Control Body. According to this provision, a salary cap is a “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”.

In 2014, every settlement reached by the clubs with UEFA prohibited the increase in salary expenses for the first season following the agreement. In 2015, this condition was not stipulated in all of the agreements. More concretely, the agreements settled with Ruch Chorzów, Panathinaikos, Hapoel Tel Aviv, and Hull City, do not include a salary cap.

Changes have also occurred regarding the structure of the salary cap imposed. In 2014, a unitary interpretation of the salary cap provision was used by UEFA. In the case of Manchester City, for of example, UEFA stated that “employee benefit expenses cannot be increased during two financial periods”.[3]

In 2015, however, UEFA used two different ways to ‘cap’ salaries:

1. In the cases of the FC Rostov, CSKA Sofia and Kardemir Karabükspor settlements, it held that “the total amount of the Club’s aggregate cost of employee benefits expenses is limited”.

2. With regard to FC Internazionale and Besiktas, the settlements hold that “the employee benefit expenses to revenue ratio is restricted and that the amortisation and impairment of the costs of acquiring players’ registration is limited.”

The first alternative is similar to the solution adopted in 2014 to cap players’ wages. As UEFA releases only some elements of the settlements, the precise levels of the cap imposed remain unknown, as was the case last year. The mechanism used by UEFA in the case of Besiktas and FC Internazionale is different. It is based on a fixed ratio between employee benefit-expenses and the clubs revenue. The cap becomes more dynamic, as it is coupled to another variable, the revenue of the club, but also less predictable. 

Is the settlement a sanction or an agreement?

According to UEFA’s regulations, the UEFA CFCB Investigatory Chamber has the power to negotiate with clubs who breached the break-even compliance requirement as defined in Articles 62 and 63 UEFA Club Licensing and Financial Fair Play Regulations. If a settlement is not reached, the CFCB Adjudicatory Chamber will unilaterally impose disciplinary sanctions to the respective clubs.

The ‘settlement procedure’ allows for a certain degree of negotiation between the parties. Settlements are likely to be in the interest of both parties. Firstly, by agreeing to UEFA’s terms, the club secures its participation in European competitions which, in many cases, are one of its main sources of revenue. Not agreeing to the terms would entail risking a much bigger sanction. Naturally, such a sanction can be appealed in front of the Court of Arbitration for Sport (CAS), but such a procedure would be expensive, time consuming and does not guarantee a better outcome. To UEFA, a settlement is a guarantee that the case ends there, that its FFP regulations do not get challenged in front of the CAS, but also that it does not need to invest resources to fight a long and costly legal battle. Moreover, the settlement procedure provides the flexibility needed for a case-by-case approach to the sanctions. 

CONCLUSION 

The settlement procedure is a key element to the current implementation process of the UEFA FFP regulations. UEFA is still in the learning phase concerning FFP and the recourse to settlements is a way to provide for much needed regulatory flexibility. Even if the settlements have many advantages for all the parties involved, they also have detrimental effects. It is regrettable that they are not published in full, even if slightly redacted, so that clubs may enjoy a higher legal certainty when facing an FFP investigation. This lack of transparency makes it harder to predict and rationalize the sanctions imposed and exposes UEFA to the risk of being criticized for the arbitrariness of its settlement practice.

This year’s settlement harvest was undoubtedly more lenient than in 2014. UEFA has apparently decided to water down its FFP sanctions, maybe to make sure that FFP survives the many legal challenges ahead. The balance between under-regulation, that would render FFP toothless, and over-regulation, that would make it difficult for clubs to invest and take risks, is indeed very difficult to find. UEFA’s settlement practice is a soft way to walk this complex line. 

[1] Article 14(1)(b) and Article 15 of the Procedural Rules Governing the UEFA Club Financial Control Body – Edition 2014.

[2] Article 61 UEFA Club Licensing and Financial Fair Play Regulations

[3] Decision of the Chief Investigator of the CFCB Investigatory Chamber: Settlement Agreement with Manchester City Football Club Limited (2014)

Editor's note: In the coming days we will introduce the supporters of our upcoming ISLJ Annual International Sports Law Conference 2018 (also known as #ISLJConf18). To do so, we have sent them a tailored questionnaire aimed at reflecting both their activities and their expectations for the conference. It is a good opportunity for us to thank them for their enthusiastic support and commitment to international sports law research. We are very proud to start this series of interviews with Women in Sports Law, an association launched in 2016 and which has already done so much to promote and advance the role of women in international sports law (many thanks to Despina Mavromati for kindly responding to our questions on behalf of WISLaw).

1. Can you explain to our readers what WISLaw is about?

Women In Sports Law (WISLaw, www.wislaw.co) is an international association based in Lausanne that unites more than 300 women from 50 countries specializing in sports law. It is a professional network that aims at increasing the visibility of women working in the sector, through a detailed members’ directory and various small-scale talks and events held in different countries around the world. These small-scale events give the opportunity to include everyone in the discussion and enhance the members’ network. Men from the sector and numerous arbitral institutions, conference organizers and universities have come to actively support our initiative.

2. What are the challenges and opportunities for women getting involved in international sports law?

Women used to be invisible in this sector. All-male panels were typical at conferences and nobody seemed to notice this flagrant lack of diversity. WISLaw created this much-needed platform to increase visibility through the members’ directory and through a series of small-scale events where all members, independent of their status or seniority, can attend and be speakers.

Another difficulty is that European football (soccer) is traditionally considered to be a “male-dominated” sport, despite the fact that there are so many great female football teams around the world. The same misperception applies to sports lawyers!

Last, there is a huge number of women lawyers working as in-house counsel and as sports administrators. There is a glass ceiling for many of those women, and the WISLaw annual evaluation of the participation of women in those positions attempts to target their issues and shed more light into this specific problem.

3. What are the burning issues in international sports law that you would like to see discussed at the conference?

The ISLJ Annual Conference has already set up a great lineup of topics combining academic and more practical discussions in the most recent issues in international sports law. 

4. Why did you decide to support the ISLJ Annual International Sports Law Conference?

The Asser International Sports Law Centre has promoted and supported WISLaw since the very beginning. The ISLJ Annual International Sports Law Conference was the first big conference to officially include a WISLaw lunch talk in its program, allowing thus the conference attendees to be part of a wider informal discussion on a specific topical issue and raise their questions with respect to WISLaw. Another important reason why WISLaw supports this conference is because the conference organizers are making sincere efforts to have increased diversity in the panels : this year’s ISLJ Annual International Sports Law Conference is probably the first sports law conference to come close to a full gender balance in its panels, with 40% of the speakers being women !

Class actions are among the most powerful legal tools available in the US to enforce competition rules. With more than 75 years of experience, the American system offers valuable lessons about the benefits and drawbacks of class actions for private enforcement in competition law. Once believed of as only a US phenomenon, class actions are slowly becoming reality in the EU. After the adoption of the Directive on damages actions in November 2014, the legislative initiative in collective redress (which could prescribe a form of class actions) is expected in 2017.[1] Some pro-active Member States have already taken steps to introduce class actions in some fashion, like, for example, Germany.

What is a class action? It is a lawsuit that allows many similar legal claims with a common interest to be bundled into a single court action. Class actions facilitate access to justice for potential claimants, strengthen the negotiating power and contribute to the efficient administration of justice. This legal mechanism ensures a possibility to claim cessation of illegal behavior (injunctive relief) or to claim compensation for damage suffered (compensatory relief).   

Class actions in antitrust and the sport sector

Throughout the years, US class actions have become an important tool to strengthen good governance in the sports sector. Due to alleged antitrust infringements, US sports organizations have been hit with a series of class action lawsuits.  The most recent and the most prominent example is the antitrust class action lawsuit O'Bannon v. NCAA. On 8 August 2014, the US District Court ruled in favour of former UCLA basketball player O'Bannon and 19 others, declaring that the National Collegiate Athletic Associations’ (NCAA) longstanding refusal to compensate athletes for the use of their name, image and likenesses (NILs) violates US antitrust laws. Previously, the college sports governing body required student-athletes  to sign ‘Form 08-3a’  in which they authorize the NCAA to use their “name or picture to generally promote NCAA championships or other NCAA events, activities or programs”, without receiving compensation. If the NCAA loses the appeal, it must allow schools to give athletes some of the money they bring in by licensing their NIL. For further discussion on the O’Bannon case, see my previous blog.

In the EU, however, antitrust class actions remain an underrated remedial option in EU competition policy and the sports sector (the same is true for competition law in general). As is well known, sports federations often have practical monopolies within certain markets. In particular, due to the substantial economic revenues of these markets, sports federations have the tendency to abuse their dominant position in contradiction with Article 102 TFEU. It is not unthinkable that the positive experiences with class actions in the US may serve as an inspiration for victims in the EU to go against powerful sports organizations. Here, useful insights may be derived from the German Handball case, which can be used as an example to explore the potential of class actions as a remedy. On 15 May 2014, German Bundesliga teams (30 of them) won the antitrust case against the International Handball Federation (IHF) and the German Handball Federation (DHB) at the regional court of Dortmund (Landgericht). For further discussion on the 2014 Dortmund judgment, see here.  

The 2014 Dortmund judgment: A comparative analysis with the O’Bannon case

The Court in Dortmund held that an obligatory release system of players for activities of their respective national teams without compensation constitutes an abuse of a dominant position prohibited by German competition law (§ 19 Gesetz gegen Wettbewerbsbeschränkungen, GWB) and Article 102 TFEU, while it also breaches the principle of good faith in contractual performance.[2] Until the judgment, German Bundesliga clubs had no other way but to release their players if they were invited to join their national team within the international calendar. According to the IHF Player Eligibility Code, “a club having a foreign player under contract is obliged to release such player to his National Federation if he is called up to take part in activities of that federation's national team” (Article 7.1.2). Furthermore, a club releasing a national player was not entitled to receive any kind of compensation and in the event of personal injury the insurance coverage was not provided (Articles 7.2-7.3). After the judgment, the IHF and the DHB should pay a fair compensation for the time of the release of the player.  

On the one hand, both cases have striking similarities. The judgments concern antitrust infringements by powerful sports federations, the IHF (also the DHB) and the NCAA respectively. Professional clubs / student athletes in both cases are not entitled to compensation due to the rules that have been set by sports organizations. The German case concerns the obligation for professional clubs to release players to national team events without receiving compensation, while the US case concerns the prohibition for student athletes to receive compensation from NIL.

On the other hand, although both cases concern antitrust infringements by the sports organizations, they also have vital differences. Most importantly, the O'Bannon case is an antitrust class action lawsuit filed against the NCAA. This class action proved to be a powerful instrument that managed to jeopardize the long-standing fundamental principle of amateurism on which the whole economic and social system of the NCAA lies. Until now, however, the 2014 Dortmund judgment has been an ordinary litigation according to German law. However, it does share some similarities with O’bannon that may justify a class action in the form of an injunctive relief (at least, in the first instance), subject to some exceptions.  

Indirect class action for an injunction

What is injunctive relief in class action cases? According to the European Commission, the courts should treat claims for injunctive orders requiring cessation of or prohibiting a violation of rights granted under EU law in order to prevent any or further harm causing damages.[3] According to the German law, in case of danger of recurrence, the infringer has to refrain from his conduct.[4] Perhaps surprisingly, the 2014 Dortmund judgment already fulfils the conditions for an indirect class action for an injunction.

First, a group of claimants (a total of 30 Bundesliga clubs) sued the IHF and the DHB before the regional court of Dortmund. They argued (together) that mandatory release of players to the national team constitutes an abuse of a dominant position prohibited by EU and German competition law. The Dortmund court ruled in favour of the handball clubs. It seems that handball clubs only seek the cessation of the unlawful practice, yet they have not claimed the compensatory relief, aimed at obtaining compensation for damage suffered.  

Second, the claim has been initiated by victims of antitrust infringement. Under the GWB, victims are allowed to bring private actions for injunctive relief in 101 and 102 TFEU infringement cases (Sec. 33).

Third, the Forum Club Handball (FCH) financially supported the court case. This may appear as third-party financing since the financial support was provided by a private third party who is not a party to the proceedings.[5] 

Although the handball clubs dropped a quiet collective bombshell, the action cannot be considered as a real class action. Simply, there was no intention to pursue a class action. Another point is that the legal standing to bring the representative action has been limited to a law firm. In Germany, collective antitrust action can be brought by a body, which has a legal standing and to whom the claims of victims of a cartel have been assigned (Sec. 33 (2) GWB). Similarly, under Sec. 8 of the German Unfair Competition Act (UWG), the claims can be sought by: a) competitor; b) qualified entities listed with the Federal Office of Justice or, in case of foreign entities, with the European Commission; and (c) by Chambers of Industry and Commerce or Craft Chambers. For these reasons, the action brought by the clubs cannot be classified as a class action, because they have chosen to be represented by an attorney. It is not unthinkable that eventually the case will appear before the court as a follow-on compensatory class action, if the IHF and the DHB lose the appeal (if necessary, the proceedings before the Court of Justice).   

Compensatory class action: why it could be a big deal?

If the handball clubs achieve an injunction in the final Court decision, the follow-on representative action for damages may be brought against the IHF and the DHB. Some provisions in German law facilitate the incentives to bring damages claims for antitrust infringements. According to Sec. 33(4) GWB, antitrust class actions should be brought after a final decision of a public authority finding there has been a violation of competition law. Furthermore, the 8th Amendment of GWB broadens the scope of the legal standing in such a way that all associations of undertakings that are affected by an infringement, as well as consumer associations, are in principle able to claim the enforcement of German competition law in courts (including by demanding damages). Yet it appears that the UWG provisions are not applicable in this case. Under Sec. 8 available remedies allow to pursue only injunctive relief. Under Sec. 9 damages are claimed by competitors (only). Sec. 10 aims at skimming off profits (paid to the Treasury), but not at compensating victims. Due to the fact that illegal profits go to the Treasury in successful cases, the handball clubs would potentially not be happy with the expected outcome.

If the IHF and the DHB lose the appeal, the handball clubs can to a significant extent rely on the final decision. Considering that an indirect form of collective action has already been pursued by the handball clubs in the first instance, a common consent of the parties involved in the case (the major condition for class action) can be easily achieved. Still, the major concern is to solve the issue of legal standing. An actual example of class action that goes with the grain of the German law and is the Cement Cartel Case, in which 28 damaged companies purchased the cartel-related claim to Cartel Damage Claims group (CDC).[6] It is a Brussels based professional litigation that turns burdensome claims into valuable assets, taking the hassle of quantification and subsequent enforcement. The substantiation of the claim is based on evidence gathered from the cartel proceedings and the damaged companies.  In the context of the German handball case, CDC could commence the acquisition of damages claims from handball clubs and then file the collective antitrust damages action against the IHF and the DHB. This is in line with the Sec. 33 GWB under which CDC has legal standing and to whom the claims under Art. 101 and 102 TFEU have been assigned. An action brought by CDC is attractive to the handball clubs because it would strengthen the negotiating power and would reduce litigation costs, as the claim is led (or even purchased) by CDC.  

If the conditions for the admissibility of class action are fulfilled, the IHF and the DHB should fear potential damages. In particular as a result of the inconsistent application of the Player Eligibility Code, the claimants are in a favourable position. Despite the fact that the Code states that “a club releasing a national player shall not have any claim to compensation”, the IHF agreed to pay compensation to the clubs for the release of their players to the national team during the 2011 and 2013 World Championships. To make matters even worse, the IHF provided insurance for the players’ salaries in case of personal injury (contrary to the Article 7.3.2).[7] This suggests that in principle a compensation and insurance coverage are compatible with the Eligibility Code and thereby the interests of the IHF are not jeopardized. The perceived inconsistency provides more clout to the claimants, suggesting that the harm has already been presumed. If the plaintiffs achieve an injunction in Court, they potentially may claim broad compensation, including other undisputed World Championships[8], the Olympic Games, continental championships as well as the qualification matches and tournaments for these events. However, it is even not the worst potential outcome for the IHF. Indeed, due to the Court of Justice (CJEU) decision in Case C-302/13 flyLAL-Lithuanian Airlines, potentially all handball clubs from EU Member States can claim damages from the IHF, if they are part of the federation. In that case, the Latvian Supreme Court sent a request for a preliminary ruling under Article 267 TFEU, asking whether a Lithuanian court judgment ordering provisional measures in a damages case can be recognized and enforced in Latvia. The CJEU ruled that actions brought by undertakings seeking redress or compensation for damage resulting from alleged infringements of EU competition law, can be qualified as a ‘civil and commercial matter’, within the meaning of Article 1(1) of Regulation No 44/2001, and enforceable in Latvia under the provisions of the said regulation. Thus, the CJEU opened a wealth of opportunities for handball clubs (if the final decision in Germany is successful) to claim damages wherever they are based on the EU’s territory. Given that follow-on damages claims have a high success rate, the winning chances are high. Hence, since the common legal and factual features of each individual claim are observed, the class action would be an effective instrument to obtain redress, also adding to the deterrence goals.

Compensatory class actions: a powerful instrument to ensure better governance in sport (federations)?

If the German handball clubs bring a compensatory class action, it has the potential to become an important precedent for many other sports. One successful case may open a Pandora’s Box that would put a lot of pressure on the sports federations’ regulations.  

By forming the group, claimants (such as handball clubs) are able to bundle individual claims and thus trigger efficiency gains by tackling common legal, factual and economic issues collectively.[9] As such, the defendants can handle the risks attached to private litigation and the probability of winning the case increases since multiple plaintiffs have larger financial means. Therefore, a group of claimants having larger financial means can employ more qualified lawyers and economic experts for antitrust cases. A package of collected claims from victims are easier introduced and defended before the court, meaning that damages are proved with sufficiently high probability and thus the chance of receiving compensation is high. When focussing on sanctions, class actions appear to deter abusive conduct, therefore strengthening good governance in sport. If all victims can sue a sports federation, the group will force the infringer to internalize the negative effects of the damage caused as close as possible to the full-compensation principle that is embedded in the EU reform on private enforcement.[10] Sport entities, knowing that class actions may be used against them and anticipating that the expected cost of the infringement may increase significantly, would think twice before violating the competition rules. The achievement of better governance would solve, or at least diminish, the problem of under-enforcement of EU competition rules in the sports sector. Even if the handball case does not result in an antitrust class action, victims from other sports should pay particular attention to such a fruitful litigation model.

[1] It was adopted Commission Recommendation of 11 June 2013 on common principles for collective redress mechanisms in the Member States for injunctions against and claims on damages caused by violations of EU rights, COM (2013) 3539/3, 11.6.2013 (‘Recommendation’).

[2] German Civil Code, Section 242 (“An obligor has a duty to perform according to the requirements of good faith, taking customary practice into consideration”).

[3] Recommendation COM (2013) 3539/3, sec. 19. In the area of injunctive relief, the European Parliament and the Council have already adopted Directive [2009/22/EC OJ L 110, 1.05.2009]  on injunctions for the protection of consumers' interests

[4] GWB, sec. 33.

[5] Recommendation COM (2013) 3539/3, Sec 14-16.

[6] http://www.carteldamageclaims.com/portfolios/cdc-german-cement-cartel/. On 17 December 2013 the Regional Court of Düsseldorf dismissed the action in its entirety [Case No. 37 O 200/09]. CDC has appealed the judgment to the Higher Regional Court in Düsseldorf.

[7]See http://www.forumclubhandball.com/?p=707 and http://www.forumclubhandball.com/?p=707. The outcome had been reached after the negotiations with the FCH in 2010-2011.

[8] The IHF decided to pay compensation for the release of players to the 2011 and 2013 World Championships.

[9] Z. Juska, ‘Obstacles in European Competition Law Enforcement: A Potential Solution from Collective Redress’ (2014) 7 EJLS, 149.

[10] Directive of the European Parliament and of the Council on certain rules governing actions for damages under national law for infringements of the competition law provisions of the Member States and of the European Union’ COM (2013) 404 final, 11.6.2013