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Brexit and EU law: Beyond the Premier League (Part 1). By Marine Montejo

Editor's note: Marine Montejo is a graduate from the College of Europe in Bruges and is currently an intern at the ASSER International Sports Law Centre.

The result of the Brexit referendum on 23 June 2016 took the European Union (almost) by surprise. A lot has been said and written about the impact of the United Kingdom leaving the EU. As in all other areas, the British sport sector will also face the effects of the modification of the relationship between the EU and its (probable) former Member State, the UK. It is nearly impossible to foresee all consequences as the UK has not even triggered article 50 TFEU yet to officially start the exit negotiations. However, as the UK position toward the EU will change in any case, this two-part blog aims to examine the main practical implications of such an exit for the UK, but also for the EU, in relation to the actual application of EU law in sport and the EU sport policy.

Unless stated otherwise, the use of the terms Brexit in this blog should be understood as a complete exit of the UK from the European Union. This blog focus in particular on this worst case scenario and its consequences for UK sport. However, it is highly improbable that the future Brexit negotiations with the EU will end up without some kind of special agreement between the two parties the first of which being an EEA type of agreement with full access to the internal market and applicability of EU law. 

The first part of this blog will examined the consequences for UK sport in terms of access to the EU internal market and the applicability of free movement principles. The second part is focused on specific impacts with regard of others domain of EU law for professional and grassroots UK sport. 


Part 1. EU free movement and the internal market

The EU internal market and its free movement of people declination was at the centre of the Brexit referendum. The potential consequences for the Premier League and professional footballers have been commented upon thoroughly elsewhere. Yet, Brexit’s impact is not restricted to British sport’s leading product, such as the Premier League, nor solely the freedom of movement provisions.


The controversy: free movement of sportspeople

The right to free movement is one of the fundamental freedoms guaranteed by the EU to its citizens and it is at the core of EU treaties. It means that any direct or indirect discrimination based on nationality is prohibited (article 18 TFEU), leaving EU citizens free to exercise their right to move freely and reside within the territories of the 28 EU Members States (article 21 TFEU). These rights apply to both professional and amateur sportspeople, and Brexit will have consequences for them whether they are British citizens or from other Members States.

First, in relation to professional and semi-professional sportspeople, when looking for example at consequences of Brexit on the Premier League, it is the principle of free movement of workers (article 45 TFEU) that is at stake. It should be noted that Brexit will impact not only footballers but also all professional athletes that are considered as “workers” within the meaning of the Treaty. In this context, “workers” means those who are gainfully employed (as stated in 1976 by the European Court of Justice - ECJ - in the Donà and Mantero case, 13/76). These athletes might be rugby or basketball players in a professional clubs or cyclists in a team to give a few examples. Also, other individuals associated with sportspeople may rely on the provisions of free movement of workers, such as doctors, physiotherapists, stable staff, coaches or administrative staff. 

Free movement also currently applies to professional and semi-professional sportspeople that are not “workers”. Freedoms of establishment (article 49 TFEU) and provision of services (article 56 TFEU) apply to athletes that are self-employed (for example tennis players, sailors or horse riders) or to instructors, coaches, or physical trainers. Sports agents may also rely on both freedoms if they are established in another of the EU’s Members States and/or if they are providing their services during a player transfer for example. To illustrate these provisions with genuine practical cases, you may want to think of a UK tennis player that has established himself in France for training purposes for a long period, or of Italian professional horse rider coming to the UK to provide a couple of hours of training for a master class. These situations are much more common than one believes and Brexit might have an important impact on significant number of people working in the sport sector.

At the time of writing it is impossible to know (or even guess) how events will unfold or what the future position of the UK toward the EU will be after Brexit negotiations. The impact will have to be assessed depending on whether and, if so, how the UK will have access to the internal market. A few UK sports officials have raised their voices to recall, for example, the strong position of British football in Europe and asked for exception regimes for their players. Without intending to sound pessimistic, EU officials have already made it very clear that the UK may not pick and choose how they access the internal market and it is difficult to see how a “sport exemption” regarding free movement of athletes may be granted against any other sectors. A solution might be to implement national UK legislation giving free access to professional players to the UK labour market. A problem will however remain regarding free access to the EU market for UK players as, in that case, there is no obligation for the EU to grant reciprocity. If the professional and semi-professional sport sector in the UK (and in the EU as well for UK players) wishes to still be able to recruit athletes that are EU citizens after the exit as easily as it was before Brexit, it should advocate for an EEA agreement (“EEA type” - which seems inconsistent with the intended aims of the referendum as, in this situation, the UK would retain its access to the internal market but would give up its voting rights). 

In the worst case scenario of a complete exit from the EU, is there any good news for UK sport? British sports federations will be able to implement rules entailing direct discrimination, including introducing quotas of players based on nationality or favouring their own athletes which is, for now, completely forbidden under EU law. On the other hand, the return of visas and work permits between the UK and the EU might lessen the level of competition in national championships as it will hinder exchanges of athletes on both sides. It is quite unsure that this is the best option for British sport. Moreover, one should remember that non-discrimination is also granted to sportspeople coming from non-EU countries under the terms of agreements between the EU and third countries (Igor Simutenkov C-265/03). For example, under the terms of the Cotonou Agreements, it is impossible to impose nationality based quotas for sportsmen from Africa, the Caribbean and the Pacific Group of States provided the player entered the territory of one of the Member States legally, which is a strict condition. This principle implies that a player coming from one of the countries covered by that agreement is not considered as a “foreign” player if quotas for such players are in force in that sport (this is the case for Rugby Union for example). It also means that the UK not only has to renegotiate its relationship with the EU but with all other non-EU countries that are, for now, covered by these association or partnership agreements. British sport will need to be cautious about it.

It should also be noted that Brexit will lead to the end of the mutual recognition of professional qualifications (see directive 2005/36). This principle applies in the sport sector as well whenever the possession of a diploma is legally required; Member States cannot refuse to permit EU citizens from other Member States to participate in a profession if they hold a recognised qualification from their country for working in that profession unless there are substantial differences in the level of qualification or duration of training. This applies to coaches (i.e. ski instructors) or doctors in the sport sector for example. Another very specific example is the European professional card (directive 2013/55/EU, applicable from 18 January 2016) that has been implemented for mountain guides (and physiotherapists) and allows for a simple and rapid recognition of professional qualifications. Consequences might be less important where an international sports governing body sets up its own set of qualifications (think about the UEFA Pro Licence for football coaches).

Free movement provisions likewise apply to amateur athletes. Based on a combined reading of articles 18, 21 and 165 TFEU, EU citizens who participate in an amateur sporting activity by using their right to free movement should not be discriminated on grounds of nationality. It is, once more, nearly impossible to currently illustrate the impact of Brexit with tangible facts but it means that free movement of EU citizens who are amateur athletes will be affected while coming to or from the UK for competition or training purposes. Furthermore, in terms of injuries or accidents while training or competing, it should be recalled that Brexit may affect the European health insurance system. This system gives every EU citizens access to state-provided healthcare during a stay in any of the EU countries under the same conditions as people insured in that country.

Finally, it should be mentioned that Brexit may impact upon the sport sector as it has links to EU citizenship. A complete Brexit will entail that sports supporters cannot travel as freely between the UK and the EU as they used to. Again, a return to a strict visa policy seems unlikely but giving up EU citizenship will have consequences on border and passport controls and on the organisation of sport events in the UK. The UK and the EU will also no longer be entitled to the cooperation organised against violence and hooliganism within the EU (Council Decision 2002/348/JHA, security at international football matches), or, at least, not in the same terms.


The underlying problem: free movement of goods

Free movement of goods is an essential element of the single market (articles 30, 34 and 35 TFEU) and it provides for the prohibition of measures that restrict trade between Member States, including not only customs duties and quantitative restrictions on imports and exports but all equivalent measures. Sports clothing and materials are covered by these provisions. We shall probably enter a period of uncertainty but the future of trade relations between the UK and the EU will be at the top of the agenda as soon as the negotiations start. Also, in order to facilitate free movement, European standards for sporting purposes goods have been set up by the European Committee for Standardization – n°136 - (full list of standards here). This probably exposes the EU to the bureaucratic suspicion but these harmonisations are necessary to facilitate trade between the EU and to ensure a common level of consumer safety. UK/EU negotiations on Brexit will surely and primarily focus on trade agreements which hopefully will lower the risk of a return to full quotas and tariffs obligations. Nonetheless, trade between the UK and the EU will suffer as much in the sport sector as for other sectors and, again, an EEA type agreement would be welcome for both parties. 

One specific category of goods is important for the sport sector, namely the circulation of civil firearms. EU sport shooters have access to a European firearms pass under directive 91/477/EEC on the control of the acquisition and possession of weapons. This means that they can cross EU internal market borders without prior authorisation in order to attend competitions and trainings. Brexit will withdraw the possibility of obtaining that pass which may result in more red tape for sportspeople at the borders.

Finally, free movement also concerns horses which under EU law are qualified of “goods intended for sporting purposes”. This term is used to refer to the set of directives regulating the movement of and trade in equidae at the EU level. Three different directives are in force and may be impacted by Brexit. In turn, this will have severe consequences for the UK as the horse sector, whether for competition or horseracing, is really strong. Identification requirements – name, genealogy and victories – are established by EU law (directive 90/427/EEC and regulation 504/2008/EC) under strict animal health conditions and “regional” quarantine principles in case of disease (directive 2009/156/EEC). Trade of horses and participation in competitions within the EU is subject to non-discrimination and equal treatment principles between horses without distinction based on the Member States of origin (directive 90/428/EEC). This principle applies to the rules of competition, the judging and the prizes awarded for that competition. Some exceptions regarding specific stud-book, regional or traditional competition are possible. Finally, it should also be noted that a European Community code relating to veterinary medicinal products exists to implement the free movement of veterinary products and to prevent animal doping. Re-entry of registered horses for racing, competition and cultural events after temporary export to non-EU countries is also regulated (directive 93/195/EEC). The UK horse sector will have to change its habits (see, for example the reaction of British horseracing authority to the Brexit vote) after Brexit and the movement of horses with the EU will be more difficult as a consequence. However, as a former EU Member State, the UK will certainly negotiate a favourable agreement with the EU even though obligations concerning the arrival from and return to their home countries outside the EU of sport horses is already regulated. Additionally, it will be possible to negotiate bilateral agreements.[1]

The impact of Brexit regarding the rules of the internal market is important and goes further than just football and the Premier League. The push for a trade agreement with access to the EU internal market here has a special importance for UK sport as for the EU. Otherwise, a complete Brexit will surely end up in a difficult step backward alongside a complete reorganisation of national rules.  




[1] Such an agreement – Tripartite Agreement (TPA) – already exists between France, the United Kingdom and Ireland.

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Asser International Sports Law Blog | The EU State aid and Sport Saga – A blockade to Florentino Perez’ latest “galactic” ambitions (part 1)

Asser International Sports Law Blog

Our International Sports Law Diary
The Asser International Sports Law Centre is part of the T.M.C. Asser Instituut

The EU State aid and Sport Saga – A blockade to Florentino Perez’ latest “galactic” ambitions (part 1)

This is the first part of a blog series involving the Real Madrid State aid case.

Apart from being favoured by many of Spain’s most important politicians, there have always been suspicions surrounding the world’s richest football club regarding possible financial aid by the Madrid City Council. Indeed, in the late 90’s a terrain qualification change by the Madrid City Council proved to be tremendously favourable to the king’s club. The change allowed Real Madrid to sell its old training grounds for a huge sum. Though the exact price for the grounds remains unknown, Real Madrid was suddenly capable of buying players like Figo and Zidane for record fees. However, the European Commission, even though agreeing that an advantage was conferred to the club, simply stated that the new qualification of the terrain in question does not appear to involve any transfer of resources by the State and could therefore not be regarded as State aid within the meaning of article 107 TFEU.

Agreements between the club and the Council have been a regularity for the last 25 years.  A more recent example concerns an agreement signed on 29 July 2011 (Convenio29-07-2011.pdf (8MB). The agreement regularizes two earlier agreements between the Council and Real Madrid dating from 1991 and 1998 respectively. The commitments deriving from those earlier agreements were not followed by the relevant parties and therefore had to give way to a new agreement. A closer look at the 29 July 2011 Agreement exposes a bizarre chain of events. It turned out that in 1998 Real Madrid transmitted an undivided half of their old training grounds to the municipality. Apart from a large sum of money, the club was to receive a number of terrains spread out over the municipality, including a terrain located in the area called Las Tablas valued at €595.194 in 1998. However, due to its qualification for sporting usage, the Council concluded in 2011 that the parcel could not be transferred to the club due to the fact that Madrid’s urbanity laws only permit a transfer of urban or urbanizable terrains. For that reason, the Council agreed to compensate the football club not for the original value of €595.194 but for a staggering €22.693.054,44! Real Madrid was not compensated in the form of a sum, but rather it was presented with a packet of terrains including four terrains of a total area of 12.435 m/2 in the street Mercedes Arteaga in the Carabanchel district of Madrid.

The year 2011 also saw a second agreement between the Council of Madrid and the football club, this time concerning construction works on the Real Madrid stadium Santiago Bernabéu. This agreement, dating from November 2011, is known as operation Bernabeú-Opañel and includes the following plans. The Council is to transfer to the club a terrain constituting a 12.250 m/2 buildable surface which borders the west-side of the Bernabéu stadium. This acquirement permits Real Madrid to cover the stadium with a roof, to build a shopping centre and a hotel on the façade situated on the Paseo de la Castellana (one of Madrid’s most important streets). In return, the club firstly agreed to transfer to the Council the shopping centre Esquina del Bernabéu, which is situated at the South-East-side of the stadium with a buildable surface of 6.858 m/2. The Council would then demolish the shopping centre and convert it into a public park. Secondly, the club is to transfer back to the Council part of the four terrains located in the street Mercedes Arteaga that it received as part of the 29 July 2011 Agreement.  In addition to the transfers of the old shopping centre and the terrains located in the street Mercedes Arteaga, Real Madrid is also to pay €6.6 million to the Council. The Council, however, encountered an obstacle in its own urban laws. The Plan General de Ordenación Urbana de Madrid de 1997 (PGOU) did not permit private parties, like Real Madrid, to construct on public terrains owned by the Council. Therefore, on 16 November 2012, the Government of the autonomous region of Madrid announced that the PGOU is to be modified ad hoc for the operation Bernabeú-Opañel.

By means of the operation Bernabeú-Opañel, Real Madrid expressed that it hopes to “convert the Club in a sporting institution of reference in the world. The aim is for the stadium to have a maximum level of comfort and services superior to the most modern and advanced sporting stadiums in the world” (PropuestaRealMadrid.pdf (914.2KB)). According to the Council, the operation will not only improve sporting and leisure facilities in the city, it will also create up to 9.546 m/2 of “green zones”. Moreover, the investment for the construction works will be borne only by Real Madrid and it is expected that the construction works will give employment to more than 2 000 people and the exploitation to 600 people.

 

In 2012, the ecological movement Ecologistas en Acción found several legal irregularities with regard to the 29 July Agreement operation Bernabeú-Opañel and (unsurprisingly) concluded that the agreements appeared to be very beneficial for Real Madrid. It therefore started legal proceedings in front of the Spanish administrative Court claiming that the ad hoc modification of the PGOU was illegal. It would later on launch on appeal in front of the Tribunal Superior de Justicia de Madrid, or Madrid High Court (TSJM-Order-31-07-2014.pdf (112.3KB)). Simultaneously, it informed the European Commission of potential unlawful State aid granted by the Council of Madrid to Real Madrid. To Spain’s outrage, on 18 December 2013, the Commission declared that it had enough reasons to believe that the incriminated transactions might involve State aid and launched a formal investigation in accordance with Article 108(2) TFEU. Concretely, the Commission expressed the following concerns:

1) The Commission doubts whether it was impossible for the Council of Madrid to transfer the Las Tablas property to Real Madrid;

2) The Commission doubts that a market value of the Las Tablas plot of land has been sought;

3) The Commission doubts the market conformity of the value of the properties which were transferred to Real Madrid by the 2011 Agreement and at the occasion of the subsequent further exchange of land around the Bernabéu Stadium, and;

4) The Commission doubts that there is an objective of common interest, which could justify selective support to a very strong actor in a highly competitive economic sector. 

The Commission’s doubts seem, in light of the facts at hand, reasonable. To decide whether or not the land transactions qualifies as unlawful State aid, however, the four cumulative criteria of Article 107(1) TFEU need to be fulfilled. (1) The aid must confer an economic advantage on Real Madrid; (2) it must be granted by a Member State or through State resources; (3) the advantage must be selective and distorts or threatens to distort competition; and (4) it must affect trade between Member States.


Advantage to Real Madrid over its competitors

As the Commission pointed out in paragraph 21 of its notice initiating the infringement procedure against Spain, “Real Madrid appears to enjoy an economic advantage from the fact that a plot of land, which at the time of its acquisition was valued at €595,194, appears 13 years later, in an operation to offset mutual debts, with a value of more than €22 million”. Furthermore, there are also doubts regarding the market conformity of the lands transferred in the operation Bernabéu-Opañel. In situations where the public authorities wish to sell public property to private investors, it should make sure that the revenue obtained from the sale is comparable to market level. This criterion is also known as the “market economy vendor principle”. In accordance with the Land sale Communication, should the public authorities wish to avoid any advantage to the recipient over its competitors during a land sale transaction, it should apply one of the two following procedures: (1) an unconditional bidding procedure or (2) a procedure where the land is valued by one or more independent asset valuers prior to the sale negotiations. The Court of Justice has ruled that other methods may also achieve the same result, but in order to comply with EU State aid rules, the national provisions establishing rules for calculating the market value of land must in all cases lead to a price as close as possible to the market value.[2] Special obligations for the buyer, such as urban planning requirements, do play a role when determining whether or not the land was sold at market value. Furthermore, land transfer deals, which often consist of more than just one land transaction, have to be scrutinized in their entirety.[3] Therefore, to determine whether an advantage was conferred to Real Madrid, both agreements between the club and the Council have to be take into account with a special focus on the valuation methods used.

In 1998, the valuation for the terrain in Las Tablas (€595,194) was done by the administration of Madrid, on the basis of legislation which offers a technique to determine the value of urban real property. The calculated value for the same terrain in Las Tablas in 2011 amounted to €22.693.054,44. According to a valuation report released by the Municipal Valuation Department, the value was calculated in accordance the same application rules. Yet it has to be borne in mind that the Municipal Valuation Department forms part of the Área de Gobierno de Urbanismo y Vivienda del Ayuntamiento de Madrid. Not only is the Área de Gobierno de Urbanismo y Vivienda the main public authority regarding urban planning in Madrid, it is together with Real Madrid the main party in the 2011 Agreement itself.

Real Madrid was not compensated in the form of a payment, but rather it was presented with another packet of terrains valued at €19,972,348.96. In the valuation report released by the Municipal Valuation Department, a list is included with average terrain values per district calculated by the independent appraiser Tasamadrid. In continuation, the Municipal Valuation Department applied a formula based on its own legislation to determine the final value of the terrains. This packet of terrains included land in the street Mercedes Arteaga, valued at €4,360,862 which were transferred back to the municipality in the operation Bernabéu-Opañel.

The operation Bernabéu-Opañel also included the club transferring the old shopping centre Esquina del Bernabéu and added a payment of €6,6 million. A second valuation report indicates that the value of the Esquina del Bernabéu is €3,861 per square meters passed on the average values of terrains found in adjacent streets. Furthermore, the Council “requalified” the terrain between the Bernabéu stadium and the street Paseo de la Castellana by ad hoc modifying the local urban laws (PGOU) before transferring it to Real Madrid. The value of this terrain is also calculated in the second report and ads up to €1,208 per square meter. Even though two of the terrains in question can be found in the same area, the value per square meter of the Esquina Bernabéu is much higher (€3,861) as compared to the value of the land between the Bernabéu stadium and the street Paseo de la Castellana (€1,208). True, the terrain with the Esquina del Bernabéu has already been built on, thereby increasing the value, but one should keep in mind that the operation Bernabéu-Opañel consists of demolishing the Esquina del Bernabéu and turning it into a green zone. On the other, the other terrain will be used for the construction of a hotel and a new shopping centre. Secondly, a quick glance at other real estate transfers in the same area of Madrid shows that the value of the terrains is in fact much higher. In 2012, the Picasso tower was purchased by a private firm for €400 million, or €5000 m/2. Today, the building Torre Titania can be bought for €11,000 m/2 and the building Castellana 200 is for sale for €150 million.

With all the above in mind, one could legitimately get the feeling that the actual aim of the Agreement of 29 July 2011 was to pave the way for the operation “Bernabéu-Opañel”, as some media suggested. Unlike in the Konsum Nord case, where the General Court held that the presence of a link between different transactions could mean that the measure in question does not constitute State aid, the link between the agreements in the Real Madrid case only increases suspicions regarding unlawful State aid. Furthermore, the Council of Madrid has also been inconstant regarding its valuation methods. The value of the terrain in Las Tablas was calculated without an independent appraiser and the value of the Esquina del Bernabéu was calculated using the average value of terrains found in adjacent streets. In short, there are good reasons to believe that the transactions were made in order to provide a financial advantage to Real Madrid.

The remaining three criteria of Article 107(1) TFEU and possible justifications will be discussed in an upcoming blog post.



[1] Notes are omitted. A comprehensive article can be accessed at Oskar van Maren, "The Real Madrid case: A State aid case (un)like any other?".

[2] Case C-239/09 Seydaland Vereinigte Agrarbetriebe [2010] ECR I-13083, §33-35

[3] Case T-244/08 Konsum Nord ekonomisk förening v Commission [2011] ECR II-0000, §58

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