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The Brussels Court judgment on Financial Fair Play: a futile attempt to pull off a Bosman. By Ben Van Rompuy

On 29 May 2015, the Brussels Court of First Instance delivered its highly anticipated judgment on the challenge brought by football players’ agent Daniel Striani (and others) against UEFA’s Club Licensing and Financial Fair Play Regulations (FFP). In media reports,[1] the judgment was generally portrayed as a significant initial victory for the opponents of FFP. The Brussels Court not only made a reference for a preliminary ruling to the European Court of Justice (CJEU) but also imposed an interim order blocking UEFA from implementing the second phase of the FFP that involves reducing the permitted deficit for clubs.

A careful reading of the judgment, however, challenges the widespread expectation that the CJEU will now pronounce itself on the compatibility of the FFP with EU law. 

Background: the proceedings before the Commission

In May 2013, Daniel Striani, a Belgian football agent licensed by the Royal Belgian Football Association, lodged a complaint with the European Commission against UEFA. He requested the Commission to launch an investigation into the break-even requirement contained in Articles 58 to 63 of the FFP. According to Striani, the break-even requirement infringes the European antitrust rules (Article 101 and 102 TFEU) and the free movement rules.

The complaint put the Commission in a difficult position. It had repeatedly expressed political support for the principles underlying the UEFA FFP. In 2009, for instance, the Commission organized a conference on the subject matter and in 2012 then Commissioner for Competition Almunia issued a joint statement with UEFA president Michel Platini stressing that the FFP are “consistent with the aims and objectives of European Union policy in the field of State Aid”. Although the vague statements were carefully drafted to prejudice a proper legal assessment, the withdrawal of the Commission’s support would have been politically embarrassing.

The Commission, however, is not obliged to carry out an investigation on the basis of every complaint brought before it. Given its limited resources, the Commission uses prioritization criteria, set out in its Notice on the handling of complaints, to determine whether there is sufficient Union interest in pursuing a complaint.

In April 2014, the Commission informed Striani, pursuant to Article 7(1) of Regulation 773/2004, of its intention to reject his complaint. The Commission put forward three grounds for rejecting the complaint. First, the Commission considered that Striani lacked a legitimate interest to lodge a complaint. Only natural and legal persons that can demonstrate that they are “directly and adversely affected” by the alleged infringement are entitled to lodge a complaint.[2] Second, the Commission argued that Striani could secure the protection of his rights before a national court. Third, the Commission stressed that it had received only one complaint regarding the FFP.

Striani’s legal counsel, Jean-Louis Dupont, challenged the first and third grounds for rejecting the complaint. He reiterated the argument that the FFP directly affects football player’s agents. In response to the third ground, he submitted three further complaints on behalf of individual football fans, a players’ agent and the Manchester City FC Supporters Club. Evidently, the fact that only two months after lodging his complaint, Striani brought a civil action before the Brussels Court of First Instance (developing virtually similar arguments as set out in the complaint) made it difficult to counter the argument that the complainant could seek relief before national courts.

The European Commission eventually opted for the easiest way out. In October 2014, it formally rejected Striani’s complaint on the sole ground that “the Brussels Court is well-placed to handle the matters raised in your complaint. This is because your rights will be protected by that court in a satisfactory manner”. Hold that thought.

The civil action before the Brussels Court

While the complaint was unsuccessful, the proceedings before the Commission did make clear that Striani needed stronger arguments to demonstrate that he has standing to complain about the FFP’s compatibility with EU (competition) law. 

Striani essentially argues that the FFP break-even rule, by reducing the number of transfers, the level of the transfer fees and the players’ salaries, has a deflationary effect on the revenue of players’ agents. Since agents are thus only indirectly affected, substantial changes were made to the original claim to buttress the legitimate interest of the original claimant.

First, when Striani commenced his civil action before the Brussels Court in June 2013, he only sought one symbolic euro as compensation for the material damage that he had allegedly suffered. In September 2014, the amount of relief sought by Striani was changed to EUR 69.750 per year since the introduction of the break-even rule.

Second, a number of other claimants later joined the same proceeding. The Brussels court admitted the voluntary intervention of: (1) Dejan Mitrovic, a players’ agent domiciled in Belgium but licensed by the Serbian Football Association; (2) RFC Sérésien, a Belgian Second Division football club (now competing as Serain United); and (3) a total of 53 football fans (i.e. supporters of Paris Saint-Germain and Manchester City) domiciled in France and the United Kingdom. 

The judgment of the Brussels Court: an example of legal fiction

In its ruling of 29 May 2015, the Brussels Court declared itself incompetent to deal with Striani’s case because it has no jurisdiction.

Since UEFA challenged its competence when the litigation was initiated, the Court had to establish whether the requirements of international jurisdiction are satisfied. When an EU competition law action is brought against an undertaking having its seat in Switzerland, the jurisdiction of Member States’ courts is determined in relation to the Lugano II Convention on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (Lugano Convention).[3] The fundamental principle laid down in Article 2 is that the defendant should be sued where it is domiciled. Since the FFP were adopted by UEFA, the place of the event giving rise to the damage must be regarded as having taken place within Switzerland. Hence, in principle, only the Swiss courts have jurisdiction over the recovery of damages suffered by the alleged anti-competitive nature of the FFP.

Only by way of derogation, Article 5(3) of the Lugano Convention, applicable to torts (delict or quasi-delict), grants special territorial jurisdiction also to the courts where “the harmful event occurred or may occur”. This covers both place where the damage occurred (Belgium) and the place of the event giving rise to it (Switzerland).[4] It follows that the defendant may be sued, at the option of the applicant, in the courts of either of those places. According to settled case law, however, this exceptional attribution of jurisdiction requires the existence of “particularly close connecting factors” between the dispute and the courts of the place where the harmful event occurred or may occur.[5]

The Brussels Court disagreed with UEFA that the damage pleaded by Striani is speculative and purely hypothetical.[6] At the same time, it stressed that this damage is no more than the indirect consequence of the harm initially suffered by the clubs (participating in UEFA’s Champions’ League and Europa League competitions): “Neither the players nor the players’ agents are addresses of the FFP. Subsequently, players could only suffer indirect harm and agents only ‘very indirect’ harm”.[7] Given that jurisdiction by virtue of Article 5(3) of the Lugano Convention depends on the identification of direct harm, the Court concluded that the necessary connecting factors based on the defendant’s act are absent. In other words, because the FFP do not adversely affect Striani directly, he lacks standing to bring a damages action for breach of EU (competition) law before a Member State’s court.[8] This restrictive interpretation of Article 5(3) of the Lugano Convention is in line with the case law of the CJEU.[9] The Court did not discuss the standing of the other claimants that joined the proceedings.

Albeit having established that only the Swiss courts are competent as to the substance of the dispute, the Brussels Court decided to grant Striani the requested provisional measure, namely blocking UEFA from implementing the next phase of the FFP implementation (i.e. the reduction of the so-called “acceptable deviation” from EUR 45m to 30m). In a surprising move, the Court invoked Article 31 of the Lugano Convention for this purpose, which stipulates that:

“Application may be made to the courts of a State bound by (the Lugano) Convention for such provisional, including protective, measures as may be available under the law of that State, even if, under this Convention, the courts of another State bound by this Convention have jurisdiction as to the substance of the matter”.

The Court did not indicate why the urgency of the situation or the need to safeguard the legal and factual situation of Striani warranted this provisional measure (whose geographical reach is limited to the Belgian territory).[10] Instead, the Court decided to make a preliminary reference to the CJEU to reach a decision on the validity of the prescribed measure. The preliminary reference, another request of Striani when initiating litigation, essentially asks whether the FFP break-even requirement is compatible with Articles 63, 45, 56, 101 and 102 TFEU.

So in the end, the Brussels Court did not send Striani home empty-handed. Yet it would seem that his victory is merely a pyrrhic one. Since UEFA decided to appeal the judgment, both the provisional measure and the preliminary reference are suspended. Hence, UEFA can proceed with the next phase of implementation of the FFP as planned. Moreover, it is unlikely that the Brussels Court of Appeal would uphold the first instance decision. First, the use of Article 31 of the Lugano Convention to trigger a preliminary reference on the substance of the case – by a court that is incompetent to deal with it - is arguably a circumvention of the requirements for international jurisdiction (and thus a perforation of the general scheme and objectives of the Lugano Convention). Second, the granting of provisional measures on the basis of Article 31 is conditional on the existence of a connecting link between the subject matter of the measure and the territorial jurisdiction of the court ordering the measure.[11] In the absence of an alternative explanation, the Court thus contradicts itself because it found that particularly close connecting factors to take jurisdiction were absent.

Back to the European Commission?

The judgment of the Brussels Court puts the European Commission in an awkward position. Evidently, the Court was incapable of adequately protecting the rights of the complainant, as the Commission had argued when rejecting his complaint.

If Striani were to re-submit his complaint, it would be difficult for the Commission to argue once again that there is insufficient Union interest to conduct an investigation. It still could argue that Striani lacks legitimate interest because he is not directly affected by the alleged infringement. The fact that the Commission ultimately refrained from using this argument the first time may prove useful if a second rejection decision would be appealed before the General Court.

In any event, an authoritative assessment of the compatibility of the FFP with EU (competition) law is unfortunately not yet on the cards. Last week UEFA soothed several embittered clubs by deciding to relax some of the FFP rules. And it would be shocking if the action brought by Paris Saint-Germain fans and – this is not a joke – the ‘Association of Angry Fans against Financial Fair Play’ before the Paris High Court would overcome the jurisdictional obstacle that caused Striani to bite the dust.

[1] See e.g. The Guardian; Daily Mail; and The Independent.

[2] Commission Regulation (EC) No 773/2004 of 7 April 2004 relating to the conduct of proceedings by the Commission pursuant to Articles 81 and 82 of the EC Treaty [2004] OJ L 123/18, Article 5(1).

[3] The Lugano Convention unified the rules on jurisdiction in civil and commercial matters and expanded the applicability of the Brussels I regulation (Council Regulation 44/2001) to the relations between Member States of the EU on the one hand and Norway, Iceland and Switzerland on the other.

[4] See e.g. Case C-352/13, Cartel Damage Claims (CDC) Hydrogen Peroxide SA v Akzo Nobel NV and Others, ECLI:EU:C:2015:335, para. 38.

[5] Idem, para. 39; Case C-228/11, Melzer v MF Global UK Ltd., ECLI:EU:C:2013:305, para. 26.

[6] Tribunal de première instance francophone de Bruxelles, Section Civile – 2013/11524/A – pp. 18, 21-22.

[7] Tribunal de première instance francophone de Bruxelles, Section Civile – 2013/11524/A – p. 18 («Que ni les joueurs, ni les agents de joueurs se sont donc visés. Que par conséquent, le préjudice qui pourrait en subir les joueurs ne peut être qu’indirect, et celui des agents de joueurs en quelque sorte ‘doublement’ indirect»).

[8] Tribunal de première instance francophone de Bruxelles, Section Civile – 2013/11524/A – p. 18 («Que par conséquent encore, l’article 5.3 ne peut fonder la compétences des juridictions belges et qu’il faut s’en tenir à la règle générale de l’article 2.1 qui renvoie aux tribunaux de l’Etat du défendeur, soit en l’espèce les juridictions suisses, pour juger du fond de l’affaire»).

[9] See e.g. Case 220/88, Dumez France SA and Tracoba SARL v Hessische Landesbank and others, ECLI:EU:C:1990:8; Case C-228/11, Melzer v MF Global UK Ltd., ECLI:EU:C:2013:305; Case C-352/13, Cartel Damage Claims (CDC) Hydrogen Peroxide SA v Akzo Nobel NV and Others, ECLI:EU:C:2015:335. Although CJEU only gives binding advice on the Brussels Convention and Brussels I and I bis Regulations, the case law is analogously applicable to the Lugano Convention (and is also taken into consideration when applying the Lugano Convention).

[10] C-261/90, Mario Reichert, Hans-Heinz Reichert and Ingeborg Kockler v Dresdner Bank AG, para. 34 (“The expression ‘provisional, including protective, measures’ … must therefore be understood as referring to measures which, in matters within the scope of the Convention, are intended to preserve a factual or legal situation so as to safeguard rights the recognition of which is sought elsewhere from the court having jurisdiction as to the substance of the matter”); Case C-391-95, Van Uden Maritime BV, trading as Van Uden Africa Line v Kommanditgesellschaft in Firma Deco-Line and Another, ECLI:EU:C:1998:543, para. 38 (“The granting of this type of measure requires particular care on the part of the court in question and detailed knowledge of the actual circumstances in which the measures sought are to take effect”).

[11] C-391/95, Van Uden Maritime BV, trading as Van Uden Africa Line v Kommanditgesellschaft in Firma Deco-Line and Another, ECLI:EU:C:1998:543, para. 40.

Comments (1) -

  • Thomas

    7/8/2015 3:26:05 PM |

    I disagree with the conclusion regarding the earlier decision of the Commission in this case.  The anticipated reference for a preliminary ruling does not mean that the European Commission's position is affected in any way.  Adequate juridictional protection does not necessarily imply that the national court must deal with the matter on its own.  On the contrary, should the interpretation of EU law be necessary for the ruling, the CJUE has to get involved.  

    As to what might happen before the Brussels court of appeal, it has already decided in an earlier decision regarding the sporting nationality of the football player Mohamed Tchité that the Brussels courts were not competent.  I was not overly convinced by the reasoning back then ... It will be interesting nonetheless.

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