Editor’s note: Josep
F. Vandellos is an international sports lawyer associated to RH&C (Spain).
He is also a member of the Editorial Board of the publication Football
Legal and a guest lecturer in the ISDE-FC Barcelona
Masters’ Degree in Sports Management and Legal Skills.
Article
6 of Annexe IV (Training compensation) of the
FIFA-RSTP (Ed. 2016) contains the so-called “Special Provisions for the EU/EEA” applicable to players moving
from one association to another inside the territory of the European Union (EU)
or the European Economic Area (EEA).
The provisions regarding training compensation result from the
understanding reached between FIFA and UEFA with the European Union in March
2001[1],
and subsequent modifications introduced in the FIFA-RSTP revised version of
2005 to ensure the compatibility of the transfer system with EU law.[2]
This
blog will focus on the exception contained in article 6(3) Annexe IV of the
FIFA-RSTP. According to this article, when “the
former club” fails to offer a contract to the player, it loses its right to
claim training compensation from the players’ new club, unless it can justify that
it is entitled to such compensation. Instead, the right of “previous clubs” to training compensation
is fully preserved irrespective of their behaviour with the player.[3] From
a legal standpoint, such discrimination between the “former club” and the “previous
clubs” raises some questions that I will try to address in this paper.
For
that purpose, the author will depart from the restrictive interpretation of article
6(3) adopted by the FIFA
Dispute Resolution Chamber (DRC) and
continue with a substantive assessment of the rule, firstly by looking at its
purposive aim and secondly, by evidencing the potential negative impact on
players’ mobility and its inherent anticompetitive effects.
A. Article 6(3) Annexe IV of
the FIFA-RSTP (Ed. 2016)
Article 6(3) of the FIFA-RSTP
reads as follows: “3. If the former club does not offer the player
a contract, no training compensation is payable unless the former club can
justify that it is entitled to such compensation. The former club must offer
the player a contract in writing via registered post at least 60 days before
the expiry of his current contract. Such an offer shall furthermore be at least
of an equivalent value to the current contract. This provision is without
prejudice to the right to training compensation of the player’s previous
club(s).”[4]
In summary, as a general rule, the former club of the player loses its
right to claim training compensation if it fails to offer the player a contract
in the terms described by the article, or cannot demonstrate a legitimate
interest.
So far, the DRC has been consistent in interpreting that the obligation
to offer the player a contract lies exclusively with the former club of the player as opposed to the previous clubs. In other words, the previous club is entitled to ask for training
compensation when the player signs the first professional contract[5] no matter whether they
offered the player a contract or showed bona
fide interest in retaining him.
At first glance, this rigid
interpretation might appear controversial in light of the more pragmatic approach
towards the formal requirements of article 6(3) adopted in the CAS award 2009/A/1757 between MTK Budapest v. FC Internazionale
Milano SpA[6]. In this case, in order to conclude that MTK Budapest was still entitled to
request training compensation despite not having offered the player a contract
in the terms indicated in the regulation, the adjudicating Panel emphasized that “[the] aims of sporting justice shall not be defeated
by an overly formalistic interpretation of the FIFA Regulations which would
deviate from their original intended purpose”.[7]
The DRC has thus systematically
admitted claims of previous clubs
against clubs that have registered professional players for the first time (e.g.
DRC decision of 17 May 2016[8]) without delving into
whether such clubs are indeed entitled to training compensation or not.
In an attempt to defy such
dogmatic approach to the issue, I question whether the different references
made in Annexe IV of the FIFA RSTP to the “former
club”[9] could and should instead
be interpreted more extensively, so as to include all former clubs (thus including previous clubs) where a player has been registered. Firstly, by having a look at the systematic
context of the rule and its purposive interpretation[10], and secondly, by taking into consideration the potential competitive
disadvantages between European clubs resulting from the regulation.
As to the rationale of the rule, the FIFA DRC
jurisprudence (vid. e.g. DRC Decision of 27 April 2006 ref. no. 461185[11]) indicates that “the spirit of and purpose of article 6 para
3 of Annexe 4 of the RSTP, 2016 edition, is to penalise clubs which are obviously
not interested in the players’ services as a professional, no matter if the
club would have to offer the player an employment contract for the first time
or a renewal due to the expiry of an already existing contract.”[12]
It appears therefore, contrary
to the spirit of the rule that a club
that has shown no interest in keeping the player as a professional, a roster or
for its academy, can at a later stage request to be rewarded for the training
of that player, irrespective of whether it was the former club, strictly speaking, or the former former club, so to speak (i.e. the previous club in the RSTP exact wording).
One could easily argue at
this point, and I would subscribe to it, that at very young ages it is either legally
prohibited for training clubs to offer a contract, or unreasonable to require clubs to offer contracts to all its players
in order to safeguard their potential right to training compensation. This was highlighted by the CAS Panel in the CAS award 2006/A/1152 ADO Den Haag v. Newcastle United FC[13] which was the appeal
against the above cited DRC Decision of 27 April 2006.
However, nothing prevents training
clubs to at least show a genuine interest
in retaining the player as an amateur by formally offering him to continue
training with them or even through a simple positive evaluation of the player. In
order to alleviate the unreasonable
burden that such obligation would suppose on training clubs, a solution could
be to require the genuine interest at
least, for players as from the season of their 16th birthday. This
would coincide with the age when in most EU countries players are legally allowed
to sign employment contracts, and form a strict sportive perspective, the age
from when training compensation is calculated in full according to article 5(3)
of Annexe IV.
The final reference in article
6(3) (i.e. “This provision is without prejudice
to the right to training compensation of the players’ previous club(s)”) helps
to ground this interpretation. It is difficult to justify from a legal
standpoint, why previous clubs should
be exempted (as they, in fact, are) from observing the same rules and
obligations as the former clubs, especially
considering the principle of free movement of workers in the EU. The right to claim
training compensation is, being redundant, “without
prejudice to the right (…) of the players’ previous club(s)”. Previous clubs should therefore, demonstrate
as well their entitlement to training compensation by evidencing a genuine
interest in the player, such as former
clubs do.
To illustrate the situation,
consider the case were an EU football club omits to offer one of its players
(e.g. 18 years old) a professional contract in the terms of article 6(3) of Annexe
IV, and that player further registers as an amateur with another EU club for
one season. That second club also fails to offer the player (now 19 years old)
a professional contract. After two seasons as an amateur, the player, finally
signs a professional contract with a third EU club at the age of 20 years. The
current interpretation of the exception leads to conclude that the first club, which
failed to offer the player a professional contract, perhaps because he was simply
not sufficiently interesting to retain, would now be reinstated in the right to
claim training compensation, while the former club, under identical circumstances
and reasons would be deprived from it.
Within those parameters, de lege ferenda the exception of article
6(3) could reasonably be extended to those previous
clubs that failed to show the so-called bona
fide interest. This way, by failing to show real interest in keeping a
player, the previous clubs would be
also prevented from asking training compensation upon the first registration of
the player as a professional, to the same extend as the former club when it fails to offer the player a contract, in the
terms indicated by the exception.
Turning
now the attention, to EU law, the conclusions on why article 6(3) Annexe 4 current
interpretation seems unfair and should be reformulated, point towards the same
direction.
B. Article 6(3) Annexe IV of
the FIFA RSTP and EU competition law
The Bosman ruling and its most recent successor, the Bernard ruling, stand out as constant reminders
that EU Law applies to the realm of European club football insofar as it
constitutes an economic activity in the sense of Article 2 of the Treaty.[14] It is
nowadays unarguable that football is a real economic activity and that the
regulations adopted by its governing bodies must respect EU Law as long as they
apply in the territory of the EU, or in case the player concerned has a
European passport and is transferring to an EU Member State. Only rules which
are “inherent to sport” such as the rules of the game, and other “practices likely to be exempted” meaning,
those activities not necessarily linked to sport but which are worth of
protection, could potentially fall outside the remit of EU competition law (the sporting exception) as pointed out
by the “Helsinki Report on
Sport” in 1999.
However, the decision in the Meca-Medina case went even further, overcoming the traditional distinction
between rules of purely sporting nature
from others, to determine that rules cannot be of purely sporting nature when they have economic repercussions, and consequently, making it possible to
explore new legal avenues to test regulations that in principle may seem outside
the scope of EU competition law (such as the doping regulations in Meca-Medina).
According to Bosman[15] and Bernard, training compensation is a
practice worth of protection, but it
is undeniable that its rules have strong economic implications, for they are expressly
meant to financially reward[16]
football clubs involved in the training and education of players when these
move to other clubs. For that reason, they fall under the remit of EU Law.
The legitimate aim of the training compensation
system is also embraced by legal scholars. For example, while delving into the
aftermath of the Bosman case and the
agreement reached between FIFA and the EU Commission in 2001, S. Weatherill
remarked that “(…). Sport has special
features that deserve respect. In accordance with Bosman, it should be regarded
as legally permissible for football to devise an internal taxation system to
transfer money into the hands of nursery clubs, as part of a scheme for
sustaining a larger number of clubs than would survive in ‘pure’ market
conditions and to diminish gaps in economic strength between clubs.”[17]
However, it is my firm belief that Annexe IV of the
FIFA RSTP has in many ways gone beyond the indications in Bosman, the Helsinki Report[18] and
later in Bernard. In this last case, the
Court referred to a system meant to compensate[19] and not reward training; and it is precisely that difference regarding the foundations
of the system implemented by FIFA that leads to disproportionate results when
the amounts to pay as training compensation are superior to the real costs
incurred by the training clubs.[20]
All these issues jeopardize free mobility within
the EU[21], for
they restrict the chances of clubs to recruit players, and have an impact on
the commercial relations between clubs and players in the sense of Article 101.
By way of example, a Romanian football club registering a 21-year old player
trained in Romania as a professional for the first time, would end up paying
the training club a significantly lower amount of training compensation than a
Hungarian club of the same category, wishing to sign that same player. The
reason for that is that whilst in the first scenario the Romanian club would be
subject to the internal training
compensation mechanism; in the second scenario, the Hungarian club would be
subject to the FIFA regulations that impose higher training compensations.
With
these premises in mind, the testing of article 6(3) Annexe IV of the FIFA RSTP
under EU competition law seems appropriate, although the application of EU competition law in
this type of cases will probably remain an exception.[22]
In short,
Article
101 TFEU[23]
prohibits agreements, decisions of associations and concerted practices which
may affect trade between Member States and have as their object or effect the prevention,
restriction or distortion within the internal market.[24] Saskia King, explaining the so-called
“objective criterion”[25], has
highlighted that “when determining
whether an agreement restricts competition under Article 101(1) TFEU, ‘object’
expresses a true alternative to ‘effect’ and as such requires separate
consideration”. Therefore, if the object of the agreement is
anticompetitive, there is no need to look behind the effects.
A primary
aspect of competition law is the identification of the relevant market where a possible anticompetitive practice takes
place. In the present context, the relevant market is the transfer market of
football players, that is, the market on which the offer and supply of players
meets and clubs compete against each other to recruit the best players.[26]
Geographically speaking, the market is limited to the territory of the Member
States of the EU.
Assuming also, that the FIFA RSTP (ed. 2016)
qualifies as a “decision by an
association of undertakings”[27]
and that the rules of training compensation have an appreciable affect in trade between Member States[28]
since any change of clubs for players under the age of 23 requires the payment
of a training compensation[29];
the questions left to answer are therefore, whether or not article 6(3) of Annexe IV of the FIFA-RSTP (Ed. 2016), in its current formulation is (1) likely to prevent, restrict or distort competition in the EU transfer
market of football players under Article 101(1) TFEU and more importantly, (2)
whether the restrictive effects are proportionate and “[reasonably]
necessary for the organization and proper conduct of sport?”[30]
As to
the first question, it is my view
that both the object and the effects produced by, article 6(3) restrict and distort
competition between clubs, for they discriminate former clubs vis-à-vis previous
clubs with regard to their right to claim training compensation.
Additionally, the compensation limits the ability of clubs to take on players
acting as free agent.
As to the second
question, the Meca-Medina case –though in a different
context[31]-
offered valuable guidance to test the compatibility of rules of sports
associations with EU competition law: “42.
Not every agreement between undertakings
or every decision of an association of undertakings which restricts the freedom
of action of the parties or of one of them necessarily falls within the
prohibition laid down in Article 81(1) EC. For the purposes of application of
that provision to a particular case, account must first of all be taken of the
overall context in which the decision of the association of undertakings was
taken or produces its effects and, more specifically, of its objectives.
It has then to be considered whether the consequential effects restrictive
of competition are inherent in the pursuit of those objectives (Wouters and
Others, paragraph 97) and are proportionate to them.”
Following
the Meca-Medina reasoning, and focusing
on the rationale behind article 6(3)
Annexe IV, in the CAS award 2006/A/1152 ADO
Den Haag v. Newcastle United FC, the CAS Panel corrected the view of the original DRC
decision of 27 April
2006. Specifically, it
remarked that the aim of the rule is “to
ensure that no player, whether amateur or professional, in whom the training
club has no interest, is impeded to accept the offer of another club because he
carries some sort of ‘compensation price tag”[32] rather
than to penalize clubs failing to offer a contract to their amateur players.
The unquestionably legitimate goal of “the
exception to the exception” - as the Panel calls article 6(3) - is thus to limit
the obstacles to the free mobility of players aforementioned.
However, as to “whether the consequential effects restrictive of
competition are inherent in the pursuit of those objectives and are
proportionate to them” there cannot be a positive answer. To me it is doubtful whether the anticompetitive
effects produced by establishing different conditions between former clubs and previous clubs are inherent or a necessary consequence to ensure
the objective of rule (i.e. contributing to free mobility). I believe the
contrary to be true. (i.e.
uently,conditions ctive of the rule, tt of EU Law. by scholars.r compensation.
in the application of such principle. nsatI bI be The effects generated
by the current interpretation of article 6(3) collide with the aim of the rule
(i.e. protecting free mobility), for reinstating previous clubs in their rights to claim training compensation
irrespective of their behaviour vis-à-vis the player, compromises free movement
within the EU and creates unfair competitive advantages for previous clubs.
In conclusion, my
suggestion is to rethink, the current formulation of article 6(3) (if not the
entire training compensation system) and correct its detrimental effects by preventing
all previous clubs that fail to offer
players a professional contract or to show bona
fide interest as from the season in which a player turns 16 years old from
requesting training compensation. It is certainly not the role of the CAS to do
so, but the responsibility of the EU Commission to take an active lead to
ensure full compliance of football regulations with EU law.
[1] See FIFA Executive Committee, “Commentary on the Regulations for the Status and Transfer of Players”, Annex 4 (29 June 2005) at page 124.
[2] European Commission Press Release of 5 March 2001, “Outcome of discussions between the Commission and FIFA/UEFA on FIFA
Regulations on international football transfers”.
[3] A bona fide and
genuine interest in keeping the player must be demonstrated before the DRC cf.
Arbitration CAS award 2009/A/1757 MTK
Budapest v. FC Internazionale Milano S.p.A., award of 30 July 2009.
[4] FIFA Regulations on the Status and Transfer of Players,
article 6(3) Annexe IV.
[5] In cases of subsequent transfer, the club entitled to claim training
compensation will always be the “former
club”.
[6]“17. As noted earlier, it is the 2005 Regulations
which apply in the present case. At the same time, however, FIFA itself has
clarified that the aim of the revisions introduced in 2005 was simply to “facilitate the evidence of a contract offer
being made”. In its Decision, the DRC stated that “...when revising the Regulations it was
decided to integrate in the 2005 edition of the Regulations some formal preconditions
in order to facilitate the evidence that a contract offer was effectively
made...This is the actual aim of the relevant formalities”.
Consequently, the Panel does not interpret the 2005 revisions to the
Regulations as constituting a substantive or material alteration to the 2001
regulatory regime because, as FIFA has said, the changes introduced related
only to matters of form, and not of substance.”
[7] See para. 31 of the award. Although, the transfer
structure used in this case could qualify as a bridge transfer used for the purpose of circumventing the FIFA
regulations on transfer compensation.
[8]
Decision of the Single Judge of the Sub-committee of the DRC case Budapest Honved FC (Hungary) v. AFC ASA 2013 Targu Mures (Romania) ref.
TMS 243. Unpublished.
[9] See also FIFA RSTP, article 2 para. 2 of Annex IV.
[10] See the CAS award 2007/A/1363 TTF Liebherr Ochsenhausen v/ETTU, award of 5 October 2007 para 12 page 8: “10. By interpreting
rules and regulations of associations, the starting point and the predominant
element of construction is the wording (literal interpretation). Other
elements such as the systematic context, the purpose and the history of the
rule may contribute to the correct understanding of the meaning of the rule.
This principle is accepted in both civil and common law and it has been
constantly applied by CAS panels. It is also embedded in the law of Luxembourg
(see, e.g., Art. 1156 of the Code Civil of Luxembourg) and the parties have not
argued otherwise.” Emphasis added.
[11] Decision not published.
[12] De Weger, The
Jurisprudence of the FIFA Dispute Resolution Chamber, Asser Press, 2nd Edition, 2016. Page
401.
[13] See para. 22 of
the CAS award 2006/A/1152 ADO
Den Haag v. Newcastle United FC, award of 7 February 2007.
[14] See also Case 36/74, Walrave and Koch v UCI, ECLI:EU:C:1974:140.
[15] Case C-415/93, Union Royale Belge
des Sociétés de Football Association and Others v Bosman and Others, ECLI:EU:C:1995:463,
paras. 106-110.
[16] See FIFA Executive Committee, “Commentary on the Regulations for the
Status and Transfer of Players”, article 1(2) and Annex 4 para. 1 (Objectives),
page 112.
[17] S. Weatherill, European
Sports Law Collected Papers, Asser
Press, 2nd Edition (2014), pages 218 and 219.
[18] See Report from the Commission to the European Council
of 10 December 1999 with a view to safeguarding current sports structures and
maintaining the social function of sport within the Community framework – The Helsinki Report on Sport - para.
4.2.1.3: The Report refers to a system of objectively calculated payments that
are related to the costs of training.
[19] Case C-325/08, Olympique
Lyonnais SASP v Olivier Bernard and Newcastle UFC, ECLI:EU:C:2010:143, paras.
44 and 45.
[20] As an example of this disproportionality, a simple comparison
between the training costs established for Cat. III UEFA clubs (30.000 Euro
per) with the training costs established for internal transfers by the Romanian
Football Football Federation (5.000 RON per year equivalent to 1.107 Euro).
[21] Training compensation rules were recently tested
against EU law, and in particular with regard to the freedom of movement of
workers, by TAS-CAS in the Riverola case (CAS
award 2014/A/Bologna FC 1909 SpA v. FC Barcelona). The award is not public, but a full comment and legal analysis is published in: Luca
Smacchia, “The Riverola case: how the
enforcement of FIFA rules may restrict the freedom of movement for workers
within the EU”, Football Legal, #5 (June 2016), pages 20-24.
[22] See e.g. Ben Van Rompuy, “Sport and EU Competition Law: New developments and unfinished business”, Asser International Sports Law
Blog (22 May 2015).
[23] Article 101
TFEU: “The
following shall be prohibited as incompatible with the internal market: all
agreements between undertakings, decisions by associations of undertakings and
concerted practices which may affect trade between Member States and which have
as their object or effect the prevention, restriction or distortion of
competition within the internal market, and in particular those which: (…) (d)
apply dissimilar conditions to equivalent transactions with other trading
parties, thereby placing them at a competitive disadvantage;”
[24] “The distinction between
"restrictions by object" and "restrictions by effect"
arises from the fact that certain forms of collusion between undertakings can
be regarded, by their very nature, as being injurious to the proper functioning
of normal competition.” - Commission Staff Working Document of 25 June
2014, Guidance on restrictions of competition “by object”
for the purpose of defining which agreements may benefit from the De Minimis
Notice, page 3.
[25] Saskia King, “Agreements that restrict
competition by object under Article 101 (1) TFEU: Past, present and future”, PhD Thesis – The London School of Economics and Political Science
(2015), Page 28.
[26] “The combined investment of summer and
winter transfer windows in the top five European leagues was almost €3.4
billion. That was up by 29 per cent versus last season and again a record high
ever.” - Soccerex Transfer Review
Winter Edition 2016, Prime Time
Sport, page 4.
[27] See, for example, Case
T-193/02, Piau v. Commission, ECLI:EU:T:2005:22, para. 69: “As
regards, first, the concept of an association of undertakings, and without it
being necessary to rule on the admissibility of the arguments put forward by an
intervener which go against the claims made by the party in support of which it
is intervening, it is common ground that FIFA's members are national
associations, which are groupings of football clubs for which the practice of
football is an economic activity. These football clubs are therefore
undertakings within the meaning of Article 81 EC and the national associations
grouping them together are associations of undertakings within the meaning of
that provision.”
[28]
For an in-depth economic data analysis see, e.g., FIFA T.M.S., Global Transfer Market 2012 Highlights,
pages 14 and 15 – Overall Market Activity - and pages 23 and 24 - Player Age.
[29] David Nilsson, “The Revised FIFA Regulations for the Status and Transfers of Players’
Compatibility with EU competition law – the Transfer System revised”. Master Thesis. Faculty of Law - University of Lund, (September 2006).
[30] Supra, 30.
[31] Doping rules under EU competition law.
[32] See para. 20 page 7 of the award: “The Panel does not share the DRC’s view that the
purpose of the first sentence of Article 6 para. 3 is to penalise clubs which
do not offer professional terms to their amateur players. Rather, in the
Panel’s opinion, the purpose of the above provision is to ensure that no
player, whether amateur or professional, in whom the training club has no interest
is impeded to accept the offer of another club because he carries some sort of
“compensation price tag”.