Editor’s note: Emilio García (emilio.garcia@uefa.ch)  is a doctor in law and head of disciplinary and integrity at UEFA. Before joining UEFA, he was the Spanish Football Federation’s legal director (2004–12) and an arbitrator at the CAS (2012–13).In this blog, Emilio García provides a brief review of a recent case before the Court of Arbitration for Sport (CAS): Klubi Sportiv Skënderbeu v UEFA (CAS 2016/A/4650)[1], in which he acted as main counsel for UEFA. 

Sport and match-fixing – A quick overview

Match-fixing is now legally defined as “an intentional arrangement, act or omission aimed at an improper alteration of the result or the course of a sports competition in order to remove all or part of the unpredictable nature of the aforementioned sports competition with a view to obtaining an undue advantage for oneself or for others”.[2] It has been said that there has always been match-fixing in sport.[3] From the ancient Olympic Games to the most important global sports competitions of today, manipulation of results has always been an all-too-frequent occurrence.

We have seen a number of very prominent instances of this kind of issue over the years. One of the most remarkable examples, which was even the subject of a film,[4] was the match-fixing episode during the 1919 World Series, where several players from the Chicago White Sox were found guilty of accepting bribes and deliberately losing matches against the Cincinnati Reds.[5]

The situation has changed considerably since then. In particular, the globalisation of the sports betting industry has had a massive impact, with recent studies estimating that between €200bn and €500bn is betted on sport every year.[6] Match-fixing does not just affect football either;[7] it is also affecting other sports, most notably tennis.[8] 

In addition to these impressive figures, it is well recognised that match-fixing has become a global issue because it allows organised criminal gangs to expand their illegal and violent activities – which include murder, extortion and assault – worldwide. It also results in the loss of billions of dollars of tax revenue and public income every year. Indeed, match-fixing is now one of the most profitable forms of money laundering.[9]

In light of the growth of this phenomenon, both international sports federations and public authorities are now engaged in a continuous battle against this scourge. More and more sports federations are establishing specific programmes in this area, which is having a major impact at national level.[10] And as regards public authorities, various resolutions have been adopted by the European Union, several initiatives have been launched by INTERPOL and EUROPOL, and, in particular, excellent work has been done by the Council of Europe, which adopted the first ever international treaty aimed at combating the manipulation of sports competitions. These are all good examples of cooperation between public authorities and the world of sport, but we are still a long way from winning this particular battle.

UEFA’s rules and integrity-related cases

AC Milan: UEFA’s first modern-day integrity case

In May 2006, a match-fixing scandal – christened the ‘Calciopoli’ – was unearthed in Italian football. Investigations led by the Italian police revealed that a network of club managers, officials responsible for referees and other individuals had sought to influence the outcome of various matches in the Serie A. Several clubs were punished by the Italian Football Federation (FIGC). One of those clubs was AC Milan, which was given a 30-point penalty. However, despite the deduction of those points, AC Milan still managed to qualify for the 2006/07 UEFA Champions League.

Thus, the admissions process for the 2006/07 UEFA Champions League presented UEFA with a real legal conundrum: could UEFA allow a club that had been punished for its involvement in the Calciopoli to take part in a European competition? On 2 August 2006, the UEFA Emergency Panel decided to allow AC Milan to participate in UEFA’s flagship competition on the basis of the following considerations:

“The UEFA Emergency Panel, being competent to decide on the matter, came to the conclusion that it had no choice but to admit AC Milan for the UEFA club competitions 2006-07 for formal reasons because of an insufficient legal basis in the regulations which would allow not admitting AC Milan under specific circumstances.”[11]

This situation was highly frustrating for UEFA, which felt that it was unable to prevent AC Milan from participating in its competition, despite the club’s involvement in match-fixing. It should also be noted that AC Milan went on to win that competition, beating English side Liverpool FC in the final on 23 May 2007.

Evolution of the legal framework

UEFA’s response to the AC Milan case was a swift one. At the very next UEFA Congress, which took place in Dusseldorf on 25 and 26 January 2007, representatives of the various member associations approved a new paragraph 3 for Article 50 of the UEFA Statutes.[12]

That amendment, which remains in force today, established a two-stage process aimed at guaranteeing the integrity of UEFA’s competitions. The first stage involves an administrative measure, whereby the offending club is excluded from European competitions for one season. The second stage involves disciplinary measures, which may be imposed subsequent to the administrative measure and do not have a maximum duration.[13]

Article 50(3) of the UEFA Statutes reads as follows:

“The admission to a UEFA competition of a Member Association or club directly or indirectly involved in any activity aimed at arranging or influencing the outcome of a match at national or international level can be refused with immediate effect, without prejudice to any possible disciplinary measures.”

That provision has also been incorporated in the regulations governing the UEFA Champions League and the UEFA Europa League, which currently feature the following wording:

“If, on the basis of all the factual circumstances and information available to UEFA, UEFA concludes to its comfortable satisfaction that a club has been directly and/or indirectly involved, since the entry into force of Article 50(3) of the UEFA Statutes, i.e. 27 April 2007, in any activity aimed at arranging or influencing the outcome of a match at national or international level, UEFA will declare such club ineligible to participate in the competition. Such ineligibility is effective only for one football season. When taking its decision, UEFA can rely on, but is not bound by, a decision of a national or international sporting body, arbitral tribunal or state court.”[14]

Key CAS rulings (2008-15)

UEFA has been very active in applying this two-stage process to its European club competitions – particularly as regards the first stage. Since the introduction of this peculiar but successful process, more than ten clubs from all over Europe have been declared ineligible to participate in UEFA competitions. In some cases, those one-season bans have been accompanied by disciplinary measures.

Inevitably, many of those cases have resulted in proceedings before the CAS in Lausanne.[15] The CAS case law derived from those key cases can be summarised as follows:

• It is firmly in the interest of UEFA, as the organiser of sports competitions, for the integrity of its competitions to be ensured and perceived to be so by the public. It is undeniably in UEFA’s interest to show the public that it takes all necessary steps to safeguard the integrity of its competitions.[16]
• UEFA does not need to wait for a final decision at domestic level, particularly when it comes to criminal proceedings, since neither UEFA nor the CAS can be forced to defer their decisions when an effective fight to ensure the integrity of sport depends on prompt action. UEFA and the CAS are not subject to the same rules as the ordinary courts in terms of procedure, proof (types of evidence and standard of proof) and substance.[17]
• The essential aim of the administrative measure is not to punish the club, but to protect the values and objectives of UEFA’s competition, its reputation and its integrity. It seeks not only to prevent a club which has violated such values from taking part in UEFA’s competition (i.e. to protect the integrity of that competition), but also to dispel any doubts in the public domain regarding the integrity, values and fairness of its competition (i.e. to protect the reputation of that competition).[18]
  
• The administrative measure is not of a disciplinary nature. Consequently, the fundamental legal principles that could potentially be applicable to disciplinary matters are not relevant.[19]
  
• The question of whether the club has any degree of culpability as regards the prohibited activities is entirely irrelevant. The principle of nulla poena sine culpa does not apply to administrative measures adopted by sports associations.[20]
  
• The range of conduct resulting in the application of an administrative measure is broader and more generic than that resulting in a disciplinary measure, which is, in principle, more restrictive and specific.[21]
  
• The administrative measure is only applicable to a club, whereas disciplinary measures can be imposed on all persons bound by UEFA’s rules and regulations (i.e. member associations and their officials, clubs and their officials, match officials, players, etc.).[22]

The CAS ruling on KS Skënderbeu: Is betting analysis sufficient to declare a club in breach of UEFA’s integrity rules?

UEFA’s betting fraud detection system

UEFA’s betting fraud detection system (BFDS) was established in 2009 in response to the growing threat of match manipulation in both UEFA and domestic competitions.

The BFDS highlights irregular betting patterns, both before and during matches, in the core betting markets, monitoring all major European and Asian bookmakers. The core betting markets are: the Asian handicap market; the totals market (number of goals in a match); and the 1X2 market (home win, draw or away win). The BFDS covers all UEFA competition matches (approximately 2,000 per season) and all matches in member associations’ top two divisions and cup competitions (approximately 30,000 matches per season).

The BFDS uses sophisticated algorithms and mathematical models to compare calculated odds with actual bookmakers’ odds, in order to determine whether the odds at a specific point in time or over a specific period are irregular.[23]

If a match displays irregular betting patterns, the matter is escalated and a report is generated. These reports include detailed information on the betting operators being monitored, together with match-specific data – e.g. regarding the current form of the teams involved, on-field action, players, match officials and motivational factors (such as the potential for promotion, relegation or qualification for a UEFA competition). Reports contain textual analysis and expert assessments, as well as graphical representations of movements in the relevant betting market.[24]

UEFA’s primary BFDS partner and information provider is Swiss-based company Sportradar. Founded in 2001, this company employs a team of highly trained sports betting analysts dealing exclusively with European football.

The facts of the case

On the basis of analysis of BFDS reports, it was concluded that Albanian football club KS Skënderbeu had been involved in a very large number of matches with inexplicable betting patterns. These included matches in Albania’s domestic league, the Albanian Cup and UEFA competitions, as well as several friendlies against foreign clubs. On the basis of UEFA’s experience in the areas of betting and match-fixing, it was concluded that the activities relating to Skënderbeu were of a highly organised nature.

While the vast majority of clubs will never feature in BFDS reports, it should be noted that Skënderbeu has appeared in more than 50. If we look at all the clubs that have been the subject of BFDS reports since 2010, Skënderbeu has been flagged up far more times than any other club in Europe.

Proceedings before UEFA’s disciplinary bodies

Against this background, charges were brought against Skënderbeu before UEFA’s disciplinary bodies with a view to imposing an administrative measure preventing the club from taking part in the 2016/17 UEFA Champions League.[25] A hearing took place before the UEFA Appeals Body, which acted as the first and final instance in this case.[26] The Appeals Body upheld the charges against the club – i.e. it deemed that Skënderbeu had indeed been involved in domestic and international activities aimed at arranging or influencing the outcome of matches. Consequently, the club was declared ineligible to participate in the 2016/17 UEFA Champions League.

Skënderbeu then lodged an appeal against this decision before the CAS.

The CAS award

The dispute between UEFA and Skënderbeu before the CAS essentially revolved around the interpretation of the BFDS reports and the legal value that should be attributed to them. UEFA, for its part, relied on those betting reports in concluding that the Albanian club had been involved in activities aimed at arranging or influencing the outcome of matches at domestic and international level. Skënderbeu, on the other hand, maintained that the BFDS reports (i) were not sufficient to prove match-fixing, (ii) were not capable of attributing specific responsibility as regards involvement in match-fixing, and (iii) were simply objective alarm mechanisms, which needed to be supported by other external evidence pointing in the same direction.

The CAS limited itself to an analysis of four Skënderbeu matches in UEFA competitions (namely, the club’s matches against Crusaders FC on 21 July 2015, against GNK Dinamo Zagreb on 25 August 2015, against Sporting Clube de Portugal on 22 October 2015 and against FC Lokomotiv Moskva on 10 December 2015) and refrained from analysing domestic matches and other pieces of evidence submitted by UEFA. It did so in order to avoid prejudicing any disciplinary measures that UEFA might potentially impose on the club.[27]

The starting point for the legal analysis conducted by the CAS Panel tallied with UEFA’s approach to this case and the question of whether BFDS reports could be used as the sole piece of evidence when prosecuting cases of match-fixing. The CAS agreed with UEFA that there were potential analogies between athletes’ biological passports and BFDS reports: “The Panel notes the similarities between the procedures followed in respect of the BFDS and the athlete blood passport (the ‘ABP’) in doping matters. Both rely initially on analytical data which is subsequently interpreted by experts/analysts before conclusions are drawn as to whether a violation is presumed to be committed or not.”[28]

Using this analogy, the Panel explained how analytical information was processed within the BFDS, highlighting the fact that the BFDS – like the ABP – indicates the likelihood of a violation having occurred, rather than providing absolute proof one way or the other: “The BFDS analyses whether the analytical information regarding betting on football matches can be explained by ‘normal’ circumstances. The conclusion that the statistical information cannot be explained by ‘normal’ circumstances does not necessarily entail that it must hence be concluded that the results are to be explained by match-fixing.”[29] The Panel went on to say that “[i]n order to come to the conclusion that a match is fixed […] the analytical information needs to be supported by other, different and external elements pointing in the same direction”.[30] With this in mind, the Panel noted that “the final conclusions drawn are not only based on analytical data and the absence of any ‘normal’ explanation, but indeed take into account several external factors corroborating the theory that the abnormal betting behaviour was likely to be explained by match-fixing: suspicious actions of players that took place on the field of play, suspicions raised by an opponent after the match, the emergence of a betting pattern in respect of the Club whereby it would concede late goals when the tie was no longer competitive and the fact that the Hong Kong Jockey Club, a prominent Asian bookmaker, removed the Club from live markets before the end of a game”.[31]

The Panel also attributed considerable weight to the betting patterns surrounding the four European matches under examination: “The Panel particularly considers the emergence of a betting pattern […] to be convincing evidence that the Club is at least indirectly involved in match-fixing activities. This betting pattern consists of the fact that it was observed in four different matches of the Club in either the UEFA Champions League or the UEFA Europa League in the first half of the 2015/2016 sporting season, that the actual bookmakers’ odds started to divert considerably from the calculated odds at the end of the match when the tie was no longer competitive (i.e. when it was clear that the Club would lose the tie on the basis of the aggregate score or that it would win the tie).”[32]

All in all, the Panel concluded that the “analytical information derived from the BFDS is valuable evidence that, particularly if corroborated by further evidence, can be used in order to conclude that a club was directly or indirectly involved in match-fixing”.[33]

Conclusion

Over the last few years, I have heard many betting experts state that monitoring is not the answer to match-fixing in sport. I fully agree with all of them, particularly since they know far more about the betting market than I do. Perhaps as a consequence of my limited legal skills (since even bad lawyers are always trying to find solutions to a complex reality), I would prefer to say that monitoring is not the only answer to match-fixing.

What the CAS ruling on Skënderbeu shows is that action can be taken if you have a proper monitoring system. Again, monitoring is not the sole solution to this problem, but it represents an additional evidentiary tool and can play an important role in legal proceedings. We should remember that match-fixing is linked to corruption and that the parties involved will inevitably “seek to use evasive means to ensure that they will leave no trail of their wrongdoing”.[34] Importantly, the legal framework governing match-fixing is clearly different for ordinary courts, where “the applicable rules in terms of procedure, proof (types of evidence and standard of proof) and substance are not the same as those that apply before UEFA and the CAS”.[35] In this context, a monitoring system can play a key legal role in safeguarding the integrity of a competition.

[1] A copy of the CAS award is available at: http://www.uefa.org/disciplinary/casdecisions/index.html.

[2] Article 3(4) of the Council of Europe Convention on the Manipulation of Sports Competitions.

[3] See Hill, D. (2016). Why sport is losing the war to match-fixers. Global Corruption Report: Sport, Transparency International, p. 231.

[4] Eight Men Out, directed by John Sayles, which was released in 1988.

[5] See Carpenter, K. (2013). Global Match-Fixing and the United States’ Role in Upholding Sporting Integrity. Berkeley Journal of Entertainment and Sports Law, Vol. 2, Issue 1.

[6] See Sorbonne-ICSS (2014). Protecting the Integrity of Sport Competition: The Last Bet for Modern Sport.

[7] See FIFPro (2016). 2016 FIFPro Global Employment Report.

[8] See ESSA (2016). ESSA Q3 2016 Integrity Report.

[9] See Anderson, J. (2014). Match Fixing and Money Laundering. The International Sports Law Journal.

[10] Among others, the Tennis Integrity Unit (see http://www.tennisintegrityunit.com/) or the Cricket Anti-Corruption Unit (see http://www.icc-cricket.com/about/46/anti-corruption/overview).

[11] The full official UEFA statement is accessible at the following link: http://www.telegraph.co.uk/sport/2342180/Milan-restored-to-Champions-League.html. 

[12] See http://www.uefa.org/documentlibrary/aboutuefa.

[13] CAS 2013/A/3256, Fenerbahçe SK v UEFA, para. 160 et seqq.

[14] Article 4.02 of both the Regulations of the UEFA Champions League 2016/17 and the Regulations of the UEFA Europa League 2016/17 (http://www.uefa.org/documentlibrary/regulations/index.html).

[15] The CAS has reviewed a total of six cases relating to the refusal of admission on grounds of integrity. See generally Deakes, N. (2014). Match-Fixing in football: The epistemology of the Court of Arbitration for Sport Jurisprudence. Australian and New Zealand Sports Law Journal

[16] TAS 2011/A/2528, Olympiacos Volou FC v UEFA, para. 141.

[17] Ibid., para. 136.

[18] CAS 2014/A/3625, Sivasspor Kulübü v UEFA, para. 123.

[19] Ibid., para. 128.

[20] CAS 2014/A/3628, Eskişehirspor Kulübü v UEFA, para. 136.

[21] Ibid., para. 105.

[22] Ibid.

[23] Calculated odds are a mathematical representation of the true probability of an occurrence, without the external effects of money and subjective opinions. In effect, they show what should be happening to the odds, instead of what is actually happening.

[24] See Forrest, D., & McHale, I. (2015). An evaluation of Sportradar’s fraud detection system.

[25] See García, E. (2015). UEFA’s Judicial Bodies. Football Legal, Issue 4.

[26] See Article 24(4) of the UEFA Disciplinary Regulations.

[27] See Article 4.03 of the Regulations of the UEFA Champions League 2016/17.

[28] CAS 2016/A/4650 Klubi Sportiv Skënderbeu v UEFA, para. 82.

[29] Ibid., para. 85.

[30] Ibid., para. 86.

[31] Ibid., para. 87.

[32] Ibid., para. 97.

[33] Ibid., para. 79.

[34] CAS 2010/A/2172, Mr Oleg Oriekhov v UEFA, para. 54.

[35] TAS 2011/A/2528, Olympiacos Volou FC v UEFA, para. 136.

This is the second part of a blog series on the Real Madrid State aid case. In the previous blog on this case, an outline of all the relevant facts was provided and I analysed the first criterion of Article 107(1) TFEU, namely the criterion that an advantage must be conferred upon the recipient for the measure to be considered State aid. Having determined that Real Madrid has indeed benefited from the land transactions, the alleged aid measure has to be scrutinized under the other criteria of Article 107(1): the measure must be granted by a Member State or through State resources; the aid granted must be selective; and it must distorts or threatens to distort competition. In continuation, this blog will also analyze whether the alleged aid measure could be justified and declared compatible with EU law under Article 107(3) TFEU.

The aid is granted by the State or through State resources

In its decision to launch a formal investigation, the Commission concluded that Real Madrid “enjoyed an advantage which derives from State resources, as the State forgoes possible revenues”.[1] Given that the Commission argued in 2002 that a requalification of a terrain does not entail State aid because there was no transfer of State resources and given that the facts regarding the requalification show some striking similarities with the current case, it is surprising that the Commission provided such a limited analysis. This might leave open the possibility for Real Madrid or the Council to argue that they could have legitimately expected that the land transactions concerned were free of a transfer of State resources. Therefore, it would have been more prudent for the Commission to further highlight the differences between the case in question and its decision not to start an investigation in 2002.

As regards land sale transactions, the land that is sold under market value by the public authorities is to be considered a State resource. The agreements to (1) compensate Real Madrid for the terrain in “Las Tablas” by providing the club other terrains and (2) to provide Real Madrid the land between the stadium and the “Paseo de la Castellana” are both imputable to the Council of Madrid and imply a loss of State resources. As regards the ad hoc modification of the PGOU, even though the modification provides a selective advantage to Real Madrid, this measure is unlikely to qualify as State aid, because no State resource has been transferred. 

The selectivity of the aid granted

With regard to whether the agreements favoured Real Madrid over its competitors, the Council could hold that both agreements could only be made with Real Madrid and not with any other football club. The first agreement involved a compensation for the impossibility to transfer a land from the Council to Real Madrid and the second agreement concerned further land transactions between Real Madrid and the council that, due to the location of several of the terrains in question, could not be offered to another football club.

Nonetheless, both measures at hand can most definitely be considered selective, thereby favouring Real Madrid over its competitors. The agreement of 29 July 2011 is selective because it only involves Real Madrid. Not only does the compensation include an economic advantage for the club, Real Madrid will also have the acquired terrains at full disposal, allowing it to sell, rent, swap or construct in any way it pleases.

Moreover, despite that the Council stated that Real Madrid had to bear all the costs for the construction of the hotel, the parking space and the shopping centre, it is also true that all the benefits of the exploitation will go directly to the football club and not to any of its competitors. The competitors, in this sense, should be interpreted wider than just being other football clubs. The Council has not given any reasons why a hotel and shopping centre in one of the main streets of Madrid has to be exploited by the undertaking Real Madrid. The “Bernabéu-Opañel” plan is therefore also selective in that it favours Real Madrid over competitors that exploit hotels and shopping centres. 

The aid has an effect on inter-State trade and distorts competition

In order for the measures to fall within the prohibition of Article 107(1), there must be an effect on competition and inter-State trade. For this condition to be fulfilled, it is sufficient that the Commission can establish a link between the measures in question and a potential effect on competition and trade. The recipient, Real Madrid, is an undertaking that operates in the European football sector. The 29 July 2011 Agreement could have allowed Real Madrid to receive a higher compensation than what it should have gotten, had the Council used the market values of the terrains in question. The economic advantage obtained by Real Madrid could be used to strengthen its position in the football sector. The same can be said for the operation “Bernabéu-Opañel”. A possible economic advantage deriving from this measure enables the football club to generate profits from the exploitation of a hotel and a shopping centre. This extra income could enable them to strengthen their team by buying new players. A strengthened Real Madrid would distort competition since other football clubs have not enjoyed the same support.

Secondly, the fact that the measure facilitates Real Madrid to run and exploit a hotel in one of the most important streets of Madrid, distorts competition in the hotel sector as well. Other hotels might generate less money because Real Madrid is exploiting an indirectly publicly subsidized hotel.

All the four criteria of Article 107(1) TFEU are fulfilled. The land transactions have created an advantage to the recipient, Real Madrid. Furthermore, the lands provided by the Council are to be regarded as State resources and, given that the measures were selective, competition has been distorted.  

Can the aid be justified?

The moment an aid measure fulfils all the criteria of Article 107(1), it will be seen as constituting State aid. However, the measure could still be deemed justified under certain conditions in accordance with EU Law. There are no EU Regulations or Commission guidelines on the application of State aid rules to commercial sporting activities. Therefore, the question whether the aid can be justified needs to be based on the conditions set in Article 107(3)(c) TFEU.[2] Article 107(3)c) provides that aid may be compatible if it facilitates the development of certain economic activities or of certain economic areas, where such aid does not adversely affect trading conditions to an extent contrary to the common interest. The Commission understands that the specific nature of sport needs to be taken into account when dealing with State aid cases, as sport fulfils educational, public health, social and recreational functions. Furthermore, it is established Commission practice that a measure may be declared compatible if it is necessary and proportionate and if the positive effects for the common objective outweigh the negative effects on competition and trade.[3] In a Hungarian State aid case dating from 2011, the Commission approved an aid measure for the Hungarian sport sector, since the general objective of the measure (“increase the participation of the general public in youth activities”) took into account Hungary’s commitments that the benefits would be distributed to the widest possible beneficiaries, and is therefore in line with the common market. [4]

Furthermore, over the last two years the Commission has reached several final decisions involving State aid granted for the construction of football stadiums. For example, in a decision dating from 20 November 2013, the Commission decided not to raise objections regarding the plan of the Flemish government to subsidize the renovation and the construction of multifunctional football stadiums as the State aid contained therein was deemed compatible with Article 107(3)(c) TFEU. Even though all the criteria of Article 107 (1) were fulfilled, the Commission acknowledged that the social, cultural and educational return of football stadiums plays a central role in the decision whether the aid could should be declared compatible. Since all the stadiums in question would have a clear multifunctional character and different players could use the stadiums for different events, the Commission found that the general public would benefit from the aid and that the positive effects would outweigh the negative effects.[5]

When applying the balancing test to the possible aid measures involving Real Madrid, firstly, as regards the 29 July 2011 Agreement, there does not appear to be an objective of common interest. The agreement was made with the sole objective of compensating Real Madrid and was not beneficial for the general public.

As regards the “Bernabéu-Opañel” on the other hand, the Council held that the operation would create additional “green zones” for the city and that the hotel and shopping centre would provide work to around 600 people. The question remains, however, whether the positive effects derived from the creation of 600 jobs outweigh the negative effects on competition and trade.

In its decision, the Commission considered that it did not appear to pursue an objective of common interest, which could justify an economic advantage to one of the biggest and most successful operators in a highly competitive economic sector. [6] Indeed, the only player in the football sector that will benefit from the operation “Bernabéu-Opañel” is Real Madrid. The fact that Real Madrid could generate profits from the hotel and shopping centre will not be beneficial to other football clubs operating in the football sector, nor will it be beneficial to the football sector in general. Therefore, it seems unlikely that the positive effects of the operation “Bernabéu-Opañel” outweigh the negative effects on competition and trade.  

The recovery of the aid and possible consequences of a negative decision

A measure which constitutes State aid in the meaning of Article 107(1) TFEU and which is declared incompatible with the internal market, is unlawful. Therefore, should the Commission find that the agreements between the Council of Madrid and Real Madrid constitute unlawful aid, it will order Spain to recover the aid provided to the club.  

The Recovery of the aid

The purpose of recovery is to re-establish the situation existing before aid was unlawfully granted.[7] The procedural rules on the recovery of unlawful aid are laid down in in Council Regulation 659/1999. Article 14(1) of the Regulation provides that “the Commission shall decide that the Member State concerned shall take all necessary measures to recover the aid from the beneficiary”. Not only is the Commission exclusively competent to decide whether or not a measure constitutes unlawful State aid, it is also exclusively competent to request from a Member State to recover the unlawful State aid. Importantly, however, the recovery itself shall be done in accordance with the procedures under the law of the Member State concerned, provided that they allow the immediate and effective execution of the Commission’s decision.[8] As regards the quantification of the aid, there is no provision of Union law that requires the Commission to quantify the exact amount of aid to be recovered.[9] Nonetheless, the Commission may include information in its recovery decision enabling the addressee of the decision to work out that amount itself without overmuch difficulty.[10]

To establish the amount of aid to be recovered, one needs to firstly determine the total advantage obtained by Real Madrid and the exact moment in which Real Madrid started obtaining the advantage. At this stage in time it is difficult to determine what the Commission could consider as possible advantage. It is neither known whether the Commission takes all land transactions into account, nor is it clear what the exact value of each parcel is due to the complexity of the case and the lack of relevant information. However, once a total advantage is established, and with that the total amount of aid to be recovered, this amount would also probably include interest at an appropriate rate fixed by the Commission.[11]  Interest would be payable from the date the unlawful aid was put at the disposal of Real Madrid until the date of effective recovery. The aid can be recovered by means of a cash payment. However, alternative measures are allowed provided that the Member State ensures that the measure chosen is transparent and eliminates the distortion of competition caused by the unlawful aid. 

The consequences of a negative decision

The direct consequence of a negative decision for Real Madrid is that the situation existing before the aid was unlawfully granted would have to be re-established. Whether this situation concerns the time before the agreement of 1998, the Agreement of 29 July 2011 or before the operation “Bernabéu-Opañel” was conducted will depend on the Commission’s decision. An analysis of other Commission decisions involving land transactions in which the Commission ordered recovery of the aid indicates that the Commission does not simply undo the land transaction itself. The Commission decision that led to the Konsum Nord case included the order directed to the Swedish authorities to recover an amount equal to the difference between the amount offered for a land by the supermarket “Lidl” and the amount paid by the supermarket “Konsum”.[12] With regard to a Dutch case on an alleged sale of land below market price, the Commission established that the amount to be recovered consisted of the difference of the price paid by the undertaking “SJB” and the price initially agreed between the “SJB” and the local authorities. A third very recent example concerned unlawful forest swap transactions in Bulgaria. The Commission ordered Bulgaria to either recover the incompatible State aid granted or undo the swaps concerned. In other words, undoing the land transaction is merely an option and never an obligation.

Keeping the Commission practice in mind, in case of a negative Commission decision, the most likely scenario is that the Commission will oblige Spain to recover the advantage Real Madrid obtained from the transactions, but that the transactions themselves will not be undone. Therefore, the obvious direct consequences for the football club will constitute in paying a lump sum to the Spanish authorities equal to the difference between the valuation of the parcels as established by the Commission and as valued by the Council of Madrid.  

A more far-reaching consequence, such as an unlimited suspension of the operation “Bernabéu-Opañel”, are rather unlikely. The recovery will be done under national law[13], thus further recovery actions mainly depend on Spanish national law. The ad hoc modification of the Plan General de Ordenación Urbana de Madrid de 1997 (PGOU) that opened up the possibility of constructing on the terrain between the stadium and the “Paseo de la Castellana” can, therefore, only be challenged under national law.

If the consequences of a negative decision are only limited to paying a lump sum and, given the fact that Real Madrid is possibly financially the most powerful football club in the world, one could legitimately ask the question what the fuss is all about. Indeed, why would Real Madrid worry about paying a lump sum of, say, €20 million when its turnover exceeds €600 million per year, and when it is capable of spending more than €100 million in summer transfer fees? In my opinion, the aspects that make the Real Madrid case unlike any other State aid case are not to be found in the amount that constitutes the total financial advantage for the club nor, consequentially, the amount that would have to be recovered. What makes this case special is the very specific role played by citizens and the position Real Madrid has in the football sector. A negative State aid decision involving one of the richest and most successful football clubs in the world would serve as a warning to the entire European football sector that the Commission is serious regarding unlawful State aid granted to football clubs.  

To be continued….

[1] SA.33754 (2013/C) (ex 2013/NN) – Spain Real Madrid CF, §36

[2] Article 107(2) and Articles 107(3)a), b) and d) are also justifications, but are not relevant to the case at hand

[3] Community framework for State aid for research and development and innovation, OJ C 323, 30.12.2006, p. 1, point 1.3.

[4] SA.31722 Supporting the Hungarian sport sector via tax benefit scheme, §85-90

[5] SA.37109 (2013/N) – Belgium Football stadiums in Flanders, §28-34

[6] SA.33754 (2013/C) (ex 2013/NN) – Spain Real Madrid CF, §38-40

[7] Commission Regulation (EC) No 794/2004 implementing Council Regulation (EC) No 659/1999 laying down detailed rules for the application of Article 93 of the EC Treaty, Recital 10

[8] Council Regulation (EC) No 659/1999 laying down detailed rules for the application of Article 93 of the EC Treaty, Article 14(3)

[9] Case C-480/98 Spain v Commission [2000] ECR I-8717, §25

[10] Commission Decision SA.24123 Alleged sale of land below market price by the Municipality of Leidschendam-Voorburg, §107

[11] Council Regulation (EC) No 659/1999 laying down detailed rules for the application of Article 93 of the EC Treaty, Article 14(2)

[12] Commission Decision No C 35/2006 – implemented by Sweden for Konsum Jämtland Ekonomisk Förening, §74-77

[13] Council Regulation (EC) No 659/1999, Article 14(3)