The first part of this series looked at the legal framework in which FFP
sits, concluding that FFP occupied a ‘marginal’ legal position – perhaps
legal, perhaps not. Given the significant financial
interests in European football – UEFA’s figures suggest aggregate revenue of nearly €17 billion as at clubs’ 2015
accounts – and the close correlation between clubs’ spending on wages and their
success on the field, a legal
challenge to the legality of FFP’s ‘break even’ requirement (the Break Even
Requirement), which restricts a particular means of spending, was perhaps
And so it followed.
Challenges to the legality of
the Break Even Requirement have been brought by football agent Daniel Striani,
through various organs of justice of the European Union and through the Belgian
courts; and by Galatasaray in the Court of Arbitration for Sport. As an
interesting footnote, both Striani and Galatasaray were advised by “avocat superstar” Jean-Louis Dupont, the lawyer who acted in several of sports law’s
most famous cases, including the seminal Bosman case. Dupont has been a vocal critic of FFP’s legality since its inception.
Mr Striani’s Complaints
Initially, Mr Striani made a
complaint to the European Commission to the effect that the Break Even
Requirement breached European competition law, and that it restricts several
fundamental freedoms of the European Union guaranteed by the Treaty of the
Functioning of the European Union (TFEU); namely, the right to free
movement of people (Article 45 TFEU), the right to free movement of capital
(Article 56 TFEU), and the right to free movement of services (Article 63
In his complaint to the
Commission, Mr Striani identified five anti-competitive effects of the Break Even Requirement:
restricts external investment into football;
- It will
have the effect of calcifying the hierarchy of the game, preventing ‘small’ clubs
from competing at higher levels;
- It will
depress the transfer market;
- It will
depress players’ wages; and
- It will
therefore adversely affect players’ agents’ revenue.
Superficially at least, each
point above has merit and internal logic. Equally, there are coherent
rebuttals. For balance, some (of the various) potential counter arguments are
- From the
outset, FFP has not altogether restricted exogenous investment into football
and loss making (regardless of quantum) has been permissible for certain
expenditure. Rather than restricting investment, FFP funnels loss-making
investment in certain directions such as stadium and infrastructure spending.
- There is
little movement in football’s sporting hierarchy under any model. The evidence suggests
that those clubs who spend the most on wages tend to experience the most
success on the pitch; however, it is questionable whether there is inherent merit
in supplanting the clubs that are best able to maximise revenue generation with
those that have the owners most willing to fund losses. Under either model,
those with the most money to expend on players’ wages will usually
- It is
reductive to equate a healthy, functioning transfer market with clubs’ rights
to make losses; nor is it of intrinsic value to the sport for transfers to be
significant in magnitude, whether in cost or volume.
- Owners’ equity
inputs are far from the only source of salary growth. In any event, further
consideration should be given as to whether, if a deflationary effect can be
established, this is a function of the top end of the salary scale being
depressed reducing mean salary, or whether the impact is felt by in modal or median
salary. Ultimately, FFP could depress wages on an aggregate basis but still
benefit most players should median or modal wages improve in a more
financially stable environment.
- Players’ intermediaries
may not have a sufficiently proximate interest in the financial regulatory
aspects of clubs’ spending. UEFA’s rule-making power is given effect and legitimacy by way
of complex contractual relationship between players, clubs and the sport’s
governing bodies and intermediaries do not have privity of contract with UEFA
insofar as FFP is concerned.
Mr Striani also brought a
claim, on similar legal basis, in the Belgian national courts (Mr Striani being
based in Belgium). In part because of these collateral proceedings, the
Commission rejected Mr Striani’s complaint. In a press release, Mr Dupont confirmed that the Commission had given its view to the
effect that Mr Striani, being an agent and therefore not directly subject to
FFP, lacked a legitimate interest in the rules, and that the Belgian national
courts, already having been seized of the case, were a suitable forum for a
hearing of the merits.
Mr Striani was joined by
various other parties in his claim in the Belgian courts. However, Mr Striani
(along with his co-complainants) was again frustrated on technical grounds
outwith the substantive issues of his dispute.
The Belgian court found that it did not have jurisdiction to hear the
dispute, because, to put it simply, under the relevant jurisdictional rules
(the Lugano Convention), UEFA was entitled to be sued in the courts of its
place of domicile, i.e Switzerland. Ben van Rompuy goes into more detail on the
jurisdictional nuances here.
Somewhat oddly, given its
self-proclaimed jurisdictional incompetence, the Belgian Courts did make an
order referring the case to the Court of Justice of the European Union (CJEU).
Perhaps unsurprisingly, the
CJEU rejected the referral on the basis that it was “manifestly
inadmissible,” and also “observing that the national court had failed to provide
any of the necessary information to enable the European Court to address
European competition law issues.”
This puts Mr Striani’s
complaint into no man’s land. Rejected by the Commission; rejected by the
Belgian national courts; and rejected by the CJEU; all without any substantive
adjudicative decision as to the legality of the Break Even Requirement.
Irrespective of one’s views on FFP, it is a source of frustration that five
years on from FFP’s introduction, its legality remains an unresolved question
despite vigorous and not frivolous challenge. Mr Striani’s challenges have, to
date, proven impotent in settling the (increasingly academic) debate.
Evidently frustrated at the
Commission’s refusal to formally review the legality of FFP, Mr Striani went on
to make a complaint to the EU Ombudsman alleging maladministration by Vice President of
the Commission at the material time, Joaquín Almunia. The complaint centred on Mr Almunia’s association with Athletic Bilbao and his prior statements perceived as endorsing FFP. However, the
Ombudsman found no maladministration to have occurred.
Galatasaray’s CAS Appeal
There is, however, a forum in
which a decision has been made as to the legality of the Break Even
Requirement; namely the Court of Arbitration for Sport (CAS) in Galatasary
v UEFA (CAS
2016/A/4492). Galatasaray, like Mr Striani, were
represented by Mr Dupont; and, like Mr Striani, the basis of Galatasaray’s case
was that the Break Even Requirement breached EU competition law and illegally
trammelled EU fundamental freedoms as to workers, services and capital.
The context of the dispute was
as follows: Galatasaray was investigated by the UEFA Club Financial Control
Body (CFCB), which, as mentioned in Part One, oversees and enforces
adherence to FFP, in respect of a potential breach of FFP, and in particular
the Break Even Requirement. The procedural rules governing the CFCB allow clubs
to enter into a ‘settlement agreement’ at the discretion and direction of the
CFCB Chief Investigator.
The CFCB Chief Investigator
determined that Galatasaray had breached the Break Even Requirement and a
settlement agreement was reached that provided, inter alia, that the
Turkish club must “be break even compliant…at the latest in the monitoring
period 2015/16,” and that the club must not increase its aggregate wage
bill, which stood at €90m.
Galatasaray hopelessly failed
to meet either stipulation, increasing their wage bill by €5.5m and exceeding
the acceptable deviation figure in Break Even Requirement by €134.2m. These
figures were audited and verified by independent consultants.
In view of this egregious
breach of the settlement agreement, the Investigatory Chamber referred
Galatasaray to the Adjudicatory Chamber, who, on 2 March 2016, issued a decision ordering, inter alia, that Galatasaray reduce their wage
bill to a maximum of €65m over the next two FFP reporting periods, and banning
the club from any European competitions for which they otherwise qualified on
sporting merit for the next two seasons.
Galatasaray appealed this
decision to the CAS, arguing that the sanctions levied by UEFA were illegal
because the rules on which they were based, i.e. the FFP rules, were illegal.
If the basis of Galatasaray’s
appeal (breach of competition law, breach of fundamental freedoms) is familiar
to those with a knowledge of the legal issues FFP presents, so too will be
UEFA’s defence of the Break Even Requirement. UEFA argued that the Break Even
Requirement constitutes rules that “are prudential rules necessary for
the proper functioning of football clubs,” and “Any restriction they
may cause pursues legitimate governance
objectives and is proportionate to their achievement.” (Emphasis
UEFA’s view is clearly
intended to align FFP with the legal tests identified in Part One of this
series; namely that FFP must be:
(for the proper conduct of the sport);
(as a means to pursue that necessary objective); and
(to the aims pursued).
Applicability of EU Law
The non-application of EU law
by the CAS has previously been called ‘an absurdity’ by this blog “in light of the Bosman (and prior Walrave) case law of the CJEU, which made clear that EU law is applicable to the
regulations of Sports Governing Bodies”.
In this case, UEFA postulated that
EU law was “irrelevant” to the
dispute – the parties both being from Turkey and Switzerland
respectively, i.e. nations outside of the EU – but “did not
argue” that FFP is “not subject to the invoked provisions of EU law
or can be applicable even if contrary to these provisions.” Galatasaray argued that EU law applied as FFP
constitutes mandatory rules in EU territory. The parties agreed that Swiss law
The CAS panel of arbitrators
(the Panel) found that EU law, being a foreign mandatory rule, applied
pursuant to Article 19 of the Swiss Federal Act on Private International Law, under which arbitral tribunals must consider
foreign mandatory rules where:
rules belong to a special category of norms which need to be applied
irrespective of the law applicable to the merits of the case;
a close connection between the subject matter of the dispute and the territory
where the mandatory rules are in force; and
of Swiss legal theory and practice, the mandatory rules must aim to protect
legitimate interest and crucial values and their application must lead to a
decision which is appropriate.
The Panel found that this test
had been met on the facts in this instance. As an interesting side note, the
CAS also followed this line of reasoning in the subsequent Third Party
Ownership case discussed by Antoine Duval here.
Article 101 TFEU
The first hurdle for
Galatasaray in establishing the illegality of the Break Even Requirement is to
show that it fits within the boundaries of the prohibition laid down in Article
101 TFEU, i.e. that it has as its object or effect the prevention, restriction
or distortion of competition within the European internal market.
The Panel found that FFP did not
have anti-competitive intent as its object. On its
face, this seems a reasonable conclusion; after all, FFP is not intended to
stymie inter-club competition. However, it should not be treated as axiomatic.
As Weatherill has highlighted, “UEFA’s own website (though
not the FFP Regulations themselves) identify as one of the principal objectives
to decrease pressure on salaries and transfer fees and limit inflationary
such effect was an independent goal of UEFA in instituting FFP rather than mere
political bluster is open to question, but the objectives of UEFA should be
subject to further interrogation.
In this instance, the Panel
found that Galatasaray “failed to demonstrate that the object of [FFP] would not be stated in its Article 2 [dealing with FFP
objects]”. Having considered the question, the Panel “did not
find convincing evidence that the object of [FFP] would
be to distort competition, i.e. to favour of disfavour certain clubs rather
than to prevent clubs from trading at levels above their resources”.
Thus in order to be caught
within the prohibition under Article 101 TFEU, Galatasaray would need to show
that FFP had an anti-competitive effect. As FFP did not fall within the
examples given in the Commission’s guidance on anti-competitive agreements (horizontal/vertical), the burden of proof fell on Galatasaray to demonstrate FFP’s
They did not do so. However – and
frustratingly for those with an interest in the topic – Galatasaray
did not actually adduce any detailed empirical analysis as to the effects of FFP
on competition (para. 74).
Irrespective of the lack of
empirical evidence put forward, the Panel expressed a view that “competition
is not distorted by ‘overspending’”
(para. 76); nor does FFP ossify
the structure of the market as “dominant clubs have always existed and will
continue to exist”. The latter point is superficially correct;
however, it fails to address the fact that the Break Even Requirement may have
prevented clubs from entry to the ‘dominant club’
position of superiority.
The Panel went on to cite with
approval the applicability of the carve-out for regulatory rules developed in Wouters,
as discussed in more detail in Part One of this series.
Article 102 TFEU
Galatasaray produced evidence
that UEFA was a dominant undertaking (which, given UEFA is a governing body
with total authority over the rules of elite European football, is a case
easily made), but it did not show how it was abusing its position in the case
of FFP. Thus the Panel found that Galatasaray did not demonstrate an abuse of dominance
Galatasaray argued that the
Break Even Requirement violated fundamental freedoms of the EU as to the free
movement of workers, the free movement of capital, and the free movement of
services. However, it submitted “very little argumentation” in
support of these claims (para. 85).
The Panel highlighted the fact
that FFP does not discriminate based on nationality, as the rules apply equally
to all clubs participating in UEFA competitions; that the rules apply equally to
(para. 86); and “do not
restrict fundamental freedoms: players can be transferred (or offer services
cross-border without limitations; capitals can move from a EU country to
another without any limit.”
Ergo, the Panel found Galatasaray
had not shown any breach of a fundamental freedom of the EU.
Galatasaray did not invoke the
relevant provisions of Swiss competition law in detail; however, the Panel
noted that the substantive nature of Swiss competition law was analogous to EU
competition law, diverging only in respect of reference to the domestic market.
Accordingly, the Panel’s reasoning “would be the same” (para.
The CAS’s Finding
Galatasaray did not establish
its case and as such its appeal was not upheld by the CAS and the CFCB’s decision
was confirmed. UEFA successfully defended the first hearing on the substantive
legal issues of the Break Even Requirement.
An Illusory Victory for
UEFA may have successfully
fended off a binding determination of the legal issues at play in challenges
brought in domestic and European courts, albeit on procedural grounds; and it
may have won the first serious challenge to the substantive legal issues at
play in the CAS, albeit aided by a lack of proper particularisation of some of
the issues by Galatasaray; but it is debatable whether it was able to
altogether insulate FFP from the effect of these challenges. In the years since
its inception, the nature and content of the rules has gradually shifted
towards a more liberal approach to external investment, and in all probability
this was influenced by the vehemence of the legal challenges to the rules.
At the outset of Mr Striani’s
challenge to FFP, his lawyer, Mr Dupont, said "What my client hopes is that Uefa will be
forced to review this rule and go for more proportionate alternatives”. He may not have achieved this through a
favourable determination of the courts; however, as will be examined in greater
detail in Part Three of this series, he may have ultimately been successful in
his objectives to some extent.