Dear all,

Our Slovenian friends (and former colleague) Tine Misic and Blaž Bolcar are organising the second edition of the Sports Law Arbitration Moot (SLAM).

The best four teams of the SLAM competition will compete in the finals, which will be held in Ljubljana, Slovenia, on 30th and 31st March, 2021.

This is a great opportunity for students to familiarise themselves with the world of sports arbitration, to meet top lawyers and arbitrators in the field, and to visit beautiful Ljubljana.

Go for it!

You'll find more information and can register at https://sportlex.si/slam/en

…and everything under the sun is in tune,

but the sun is eclipsed by the moon…[1] 

The issue

Ruffling a few feathers, on 30 May 2015 the FIFA Executive Committee rather unsurprisingly, considering the previous warnings,[2] adopted a decision to suspend with immediate effect the Indonesian Football Federation (PSSI) until such time as PSSI is able to comply with its obligations under Articles 13 and 17 of the FIFA Statutes.[3] Stripping PSSI of its membership rights, the decision results in a prohibition of all Indonesian teams (national or club) from having any international sporting contact. In other words, the decision precludes all Indonesian teams from participating in any competition organised by either FIFA or the Asian Football Confederation (AFC). In addition, the suspension of rights also precludes all PSSI members and officials from benefits of any FIFA or AFC development programme, course or training during the term of suspension. This decision coincides with a very recent award by the Court of Arbitration for Sport (CAS) in this ambit, which shall be discussed further below.[4]

The former decision, substantiated upon the alleged governmental infringement of the independence of PSSI, is the latest in a line of similar decisions adopted by FIFA in recent years. It succeeds inter alia the suspension of the Nigerian Football Federation and subsequent non-recognition of its General Assembly decisions,[5] and the suspensions of the Cameroonian Football Association[6], the Football Federation of Belize,[7] the Kenya Football Federation,[8] and the Islamic Republic of Iran Football Federation.[9]

The common denominator of all these decisions is the alleged impediment of third parties, usually governments or their related bodies, in the affairs of national football associations. In the Indonesian case, the trigger was the imposition of additional licensing criteria for football clubs by BOPI, an agency of the Indonesian Ministry of Youth and Sports, which resulted in two clubs (Arema and Persebaya) being precluded from competing in the Indonesian Super League (ISL) and subsequent measures adopted by the ministry aimed at relieving PSSI of all of its responsibilities.[10] While in the Nigerian case, an initial High Court injunction prevented the elected Executive Committee from taking office, and a later intervention from the Nigerian Department of State Security Service (SSS), resulted in the suspension of the Nigerian Football Federation[11] and subsequently in the non-recognition of its General Assembly decisions,[12] the other cited cases include violations in the form of, among others, “blatant government interference”,[13] non-provision of security services from government forces,[14] and violation of the independence of the decision-making process of the national football governing body.[15] 

Grounds for intervention by FIFA

The normative basis for the aforementioned interventions lies primarily within Articles 13, 14 and 17 of the FIFA Statutes.[16] The Members’ obligation of an independent management of their affairs is embedded in Article 13(1)(i), which states that: ”Members have the following obligations... to manage their affairs independently and ensure that their own affairs are not influenced by any third parties...” Strengthening that notion, Article 17(1) provides that: “Each Member shall manage its affairs independently and with no influence from third parties.” Furthermore, the second paragraph of Article 17 explicitly points out that all the bodies need to be elected or appointed within each respective Member, which prima facie appears even more stringent than Article 7 bis of the UEFA Statutes, that constitutes:”...their executive body is freely elected and that their other bodies are elected or appointed in a completely independent way.”[17]

Enjoying full discretion that stems from its Statutes, FIFA acts upon information received about the alleged violations, usually from the Members themselves. Prior to the adoption of a decision, a “prevention” phase takes place, during which FIFA, through means of correspondence with respective Members or/and third parties involved, addresses the alleged infringements and usually allows for a deference period for compliance with specific conditions. Members and/or third parties are warned that non-compliance may result in possible sanctions. Article 13(2) of the Statutes expressly provides that: “Violation of the above-mentioned obligations by any Member may lead to sanctions provided for in these Statutes.”

One of the most daunting repercussions FIFA may avail itself of is the suspension of a Member. In accordance with Article 14(1) of the Statutes, the primary responsibility for suspending a Member lies with the Congress. However, and as seen in the cases cited above, when violations are deemed to be so serious to require prompt attention, the Executive Committee or even the Emergency Committee may step in and adopt the relevant decision.[18] If not lifted beforehand, such a decision must be confirmed by a three-quarter majority at the next Congress, otherwise it is automatically lifted. A suspension leads to a loss of all membership rights, which effectively prevents other Members from entertaining any sporting contact with the suspended Member. Moreover, the suspension does not preclude the Disciplinary Committee from imposing further sanctions (e.g. fines, return of awards, deduction of points, etc.).[19]

Another measure for addressing an eventual non-compliance with the obligation of independent management of affairs is the non-recognition of wrongfully elected bodies or decisions passed by such bodies in accordance with Article 17(2) of the Statutes. In other words, FIFA has the authority not to recognize an election of a body of one of its Members, if such an election lacks uncompromised independence vis-à-vis third parties, as was the case with the Nigerian Football Federation.

Lastly, it is also worth mentioning that sanctions may be imposed regardless of the grounds and fault for interference of third parties since Article 13(3) of the Statutes, by going beyond the actual interference, provides that: “Violations of par. 1(i) may also lead to sanctions even if the third-party influence was not the fault of the Member concerned.” This basically means that FIFA shall not entertain explanations of third party interventions that may possibly even be justified under the provisions of national law. 

To comply, or not to comply – the CAS escape route

Since a suspension decision virtually ostracises and isolates a Member, a valid point to raise is, whether apart from yielding and fulfilling the imposed conditions, other means remain available to the disgraced Member to challenge such a decision. The same could be said for the situation pertaining to the non-recognition of elected bodies of particular Members.

In accordance with Article 66 of the Statutes any dispute arising between FIFA and its Members shall be resolved by CAS applying the relevant FIFA regulations and subsidiarily Swiss law. The exclusive jurisdiction of CAS is further strengthened in Article 67 of the Statutes which also outlines the procedural requirements for an appeal against a final decision passed by one of the FIFA bodies. Moreover, the Members explicitly agree not to avail themselves of recourse to ordinary courts of law, which significantly narrows their options down.[20]

Given that jurisprudence in named cases is relatively scarce, it is worth having a closer look at the above mentioned award rendered by CAS in the joined cases brought before it by the Nigerian Football Federation.[21] Notwithstanding the previous FIFA decision to suspend the appellant, which was later lifted, the form of relief sought with the appeal was the annulment of two decisions in the form of letters, addressed at the appellant by FIFA. Considering the Court’s conclusion, stemming from the relevant CAS jurisprudence,[22] to dismiss the appeal against the second letter because it did not constitute an appealable decision since it did not contain a ruling affecting the rights of the appellant, hence lacking the animus decidendi,[23] the onus of the award was on the first challenged letter.

In its preliminary remarks the Panel narrowed down the subjective and the objective scope of the review saying that it:”...may only assess de novo, putting itself in FIFA’s place, whether FIFA had sufficient factual and legal grounds, in terms of Article 17 of its Statutes, to adopt the decisions allegedly set forth in the letters challenged by the Appellant.”[24] By abstaining from assessing the eventual legality of the third party infringement, and despite harbouring some doubts about the (non)compliance of the elections with the national law, it further stated that:”...this Panel may not assess the validity of the various NFF elections on the basis of the NFF rules or of Nigerian law, because such appraisal falls outside the scope of FIFA’s authority under Article 17 of its Statutes and, thus, falls outside of the Panel’s scope of review.”[25]

By observing that none of the parties challenged the Court’s jurisdiction, applying the FIFA regulations and additionally Swiss law pursuant to Article R58 of the CAS Code, and by dismissing the Respondent’s arguments pertaining to the admissibility and the Appellant’s active standing, the Panel addressed the legitimacy of FIFA’s non-recognition of the elections pursuant to Article 17 of the Statutes in the merits of the award.[26]

As per the legal grounds of the decision, the Panel stressed that: “The purpose of Article 17 is to grant FIFA the power to not recognize an election where the member association’s electoral process does not guarantee the complete independence of the election.”[27] It went further saying: “...the Panel is of the view that the requirement of “complete independence” found in para. 2 must be understood in the light of para. 1 of Article 17, forbidding “influence from third parties”. Accordingly, an electoral process does not guarantee such complete independence where the election is not managed in a totally independent manner and, in particular, where it is influenced by third parties of any kind (e.g. government officials or bodies).”[28]

Having established FIFA’s authority, the Panel subsequently assessed the relevant evidence submitted by the parties. After determining the relevant factual circumstances, the Panel noted that the intervention from the State Security Services (SSS) influenced the unfolding of the election and consequently of the General Assembly itself, constituting a manifest insufficiency of the independence of the election from the influence of third parties pursuant to Article 17 of the Statutes.[29] The appeal was thus duly dismissed on merits as well.

By dismissing the appeal, and in spite of recognizing the connection of the dispute with “a longstanding struggle occurring in Nigerian football between different personalities and factions fighting for leadership within the NFF”,[30] the Court, by setting a precedent to a certain extent, distanced itself from assessing the compliance of the interference with national law, hence virtually affirming FIFA’s discretion in the evaluation of the circumstances leading to its intervention, which appears to leave an eventual appeal by the Indonesian Football Federation with very slim chances of success. 

Quis custodiet ipsos custodes?[31]

When it comes to independence and third party influence issue, the Members are subject to instant scrutiny from FIFA and are swiftly held accountable, even when they hold no responsibility for a third party intervention, as may be seen in the above cited cases. The same cannot be said when the situation is reversed. FIFA is often not submitted to the same levels of accountability checks as those who are affected by its decisions.[32]

While in some instances FIFA’s prompt intervention appears well-grounded, since interference from a third party is manifestly ill-founded, as may be seen in the case of the Nigerian Football Federation (interventions from State Security Forces and unidentified armed individuals seem to go way beyond the borders of necessity, and can hence hardly be justified), other cases, namely the latest suspension of the PSSI, show that FIFA may have been slightly too quick when pulling the trigger. All the more so, given the circumstantial background of the case (e.g. pressing issues related inter alia to financial, tax and ownership issues of the clubs participating in national leagues which the PSSI, despite previous warnings, was unable or unwilling to cope with, and which in some extreme cases resulted in players losing their lives due to lack of medical care owed to arrears of health care contributions by the clubs), and the government’s intervention could arguably to a certain extent be seen as necessary.[33]

However, as seen above, under the existing rules FIFA is not inclined to look beyond the mere interference of third parties and verify whether such actions might be justified, thus possibly breaching the principle of proportionality which is recognized as a general principle by CAS.[34] Since such discretion seems to have been condoned by the latest CAS decision,[35] one may wonder whether there is actually any room for a more thorough and systematic factual assessment of the background of such interferences in the light of a possible justification, which inevitably raises questions of the eventual (over)restrictive nature of the relevant Statutes provisions themselves. Furthermore, the fact that any government intervention, regardless of the eventual acceptability and consideration of local specificities of each respective Member, is to be seen as a punishable infringement, puts the issue within the frame of the perpetual conundrum of the legitimate boundaries of the lex sportiva.

Since FIFA is virtually accountable to no-one from the hierarchical point of view, and given that governments, with the exception of the Swiss government, have no supervisory powers over it (some would argue that FIFA may itself be seen as a government),[36] the only plausible route for the assessment of the proportionality of the Statutes would seem to be through the legal accountability channel, using EU law, especially its provisions on competition and internal market.[37] In fact, given the precedents (e.g. Charleroi)[38] and the recent legal challenge of FIFA’s decision to ban Third-Party Ownership,[39] these rules appear to have become an increasingly important tool to hold the organization accountable, regardless of the latest developments regarding the prosecution of its officials.[40] A further analysis as to whether such a route remains available to potential appellants from outside of the European Union would, however, go beyond the scope of this paper. 

Conclusion

As presented throughout this brief overview, FIFA has seemingly developed a zero-tolerance policy for any governmental interference regarding the affairs of its Members, thus arguably safeguarding their independence. It has consistently availed itself of one of the most stringent corrective measures for alleged violations envisaged by its Statutes, suspending the non-compliant Members, hence often provoking strong emotional response within the pertinent countries.[41] Whereby such sanctions might be deemed necessary in certain cases, non-consideration of factual background and eventual justifications in others has led to accusations of double standards,[42] and raised questions of proportionality of the relevant Statutes provisions and the borders of the rules governing “purely sporting issues”.

The outcome of the deadlock in the latest case of PSSI remains to be seen, with the government’s intention to thoroughly reform the Indonesian football suggesting that a swift solution might not quite lie around the corner.[43] Given that compliance with the imposed conditions appears to be the route that will be taken in this case, and as long as provisions of the Statutes are not submitted to scrutiny of a competent judicial body, arguably in the form of the European Court of Justice, any future third party interferences shall most likely continue to be dealt with strictly by FIFA and the non-compliant Members will keep finding themselves “on the dark side of the moon”.[44]

[1] Pink Floyd, Eclipse (Dark Side of the Moon, EMI, 1973).

[2] Letter of FIFA to the Republic of Indonesia Minister of Youth and Sports, written in Zurich and sent on 10 April 2015.

[3] Decision of the FIFA Executive Committee: Suspension of the Indonesian Football Federation (PSSI), adopted in Zurich on 30 May 2015.

[4] Joined cases CAS 2014/A/3744 and CAS 2014/A/3766 Nigerian Football Federation v. FIFA, award of 18 May 2015.

[5] Decision of the FIFA Emergency Committee: Suspension of the Nigerian Football Federation (NFF), adopted in Zurich on 9 July 2014.

[6] Decision of the FIFA Emergency Committee: Suspension of the Cameroonian Football Association, adopted in Zurich on 4 July 2013 (FIFA Circular no. 1367, Zurich, 4 July 2013).

[7] Decision of the FIFA Emergency Committee: Suspension of the Football Federation of Belize, adopted in Zurich on 17 June 2011.

[8] Decision of the FIFA Emergency Committee: Suspension of the Kenya Football Federation, adopted in Zurich on 2 June 2004.

[9] Decision of the FIFA Emergency Committee: Suspension of the Islamic Republic of Iran Football Federation (IRIFF), adopted in Zurich on 23 November 2006.

[10] FIFA Decision of 30 May 2015, cited supra note 3.

[11] FIFA Decision of 9 July 2014, cited supra note 5.

[12] Letter of FIFA to Nigerian Football Federation (NFF), written in Zurich and sent on 29 August 2014.

[13] FIFA Decision of 2 June 2004, cited supra note 8.

[14] FIFA Decision of 17 June 2011, cited supra note 7.

[15] FIFA Decision of 23 November 2006, cited supra note 9.

[16] FIFA Statutes (Regulations Governing the Application of the Statutes, Standing Orders of the Congress), adopted in São Paulo on 11 June 2014.

[17] UEFA Statutes (Rules of Procedure of the UEFA, Congress Regulations governing the Implementation of the UEFA Statutes), adopted in Astana on 24 March 2014.

[18] FIFA Statutes, cited supra note 16, Art. 33.

[19] Ibid., Arts. 63, 65.

[20] Ibid., Art. 68.

[21] Nigerian Football Federation v. FIFA, cited supra note 4.

[22] Case CAS 2005/A/899 FC Aris Thessaloniki v. FIFA & New Panionios N.F.C., award of 15 July 2005, para. 12; Case CAS 2004/A/659 Galatasaray SK v. Fédération Internationale de Football Association (FIFA) & Club Regatas Vasco da Gama & F. J., award of 17 March 2005, paras. 23-25.

[23] Nigerian Football Federation v. FIFA, cited supra note 4, paras. 192,196.

[24] Ibid., para. 160.

[25] Ibid., para 160.

[26] Ibid., paras. 160-182.

[27] Ibid., para. 200.

[28] Ibid., para. 200.

[29] Ibid., paras. 203-211.

[30] Ibid., para. 213.

[31] “Who guards the guardians?” (translation mine); Juvenal, Satires, (Book II, Satire VI, 1st and early 2nd centuries AD), lines 347–8.

[32] R. Pielke Jr., How can FIFA be held accountable? (Sport Management Review, Issue 16, 2013), pp. 258.

[33] FIFPro, Death of Mendieta must be the turning point for Indonesia, http://www.fifpro.org/en/news/death-of-mendieta-must-be-turning-point-for-indonesia (last visited 28 June 2015).

[34] See inter alia Cases CAS Arbitration CAS 2005/A/830 S. v. FINA, award of 15 July 2005, CAS 2009/A/2012 Doping Authority Netherlands v. N., award of 11 June 2010, CAS 2012/A/2740 Marcelo Carracedo v. Fédération Internationale de Football Association (FIFA), award of 18 April 2013.

[35] Nigerian Football Fedration v. FIFA, cited supra note 4.

[36]S. Bradley, FIFA reforms face resistance – and huge support (swissinfo.ch, 5 December 2012), http://www.swissinfo.ch/eng/football-scandals_fifa-reforms-face-resistance---and-huge-support/34067104 (last visited 28 June 2015).

[37] R. Pielke, cited supra note 32, pp. 259-262.

[38] Case A/05/03843, SA Sporting du Pays de Charleroi ao v FIFA, Tribunal de Commerce de Charleroi, 15 May 2006 (Case was referred to the European Court of Justice, but did not reach a judgment since the parties reached a settlement out of court),

[39] A. Duff, Portugal, Spain Said to Complain to EU on Soccer Finance Rules (BloombergBusiness, 4 February 2015), http://www.bloomberg.com/news/articles/2015-02-04/portugal-spain-said-to-complain-to-eu-on-soccer-finance-ban (last visited 28 June 2015).

[40] BBC News, Fifa corruption inquiries: Officials arrested in Zurich (bbc.com, 27 May 2015), http://www.bbc.com/news/world-europe-32895048 (last visited 28 June 2015).

[41] ESPN, Iranian Federation suspended by FIFA (espn.com, 23 November 2006), http://www.espnfc.com/story/393454/iranian-federation-suspended-by-fifa (last visited 28 June 2015).

[42] M. Zandi, Is FIFA's Decision in the Best Interest of Football (Association Internationale De La Presse Sportive),http://www.aipsmedia.com/index.php?cod=551&page=news&tp=n#.VZAhwRuqqko (last visited 28 June 2015).

[43] Reuters, Indonesia government takes responsibility for ban (uk.reuters.com, 31 May 2015), http://uk.reuters.com/article/2015/05/31/uk-soccer-fifa-indonesia-idUKKBN0OG03920150531 (last visited 28 June 2015).

[44] Pink Floyd, Brain Damage (Dark Side of the Moon, EMI, 1973).

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,^[1] 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 inevitable.

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 TFEU).

In his complaint to the Commission, Mr Striani identified five anti-competitive effects of the Break Even Requirement:

1. It restricts external investment into football;
2. It will have the effect of calcifying the hierarchy of the game, preventing ‘small’ clubs from competing at higher levels;
3.  It will depress the transfer market;
4.  It will depress players’ wages; and
5. 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 listed below:

1. 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.
2. 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;^[2] 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 win.^[3]
3. 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.
4. 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.
5. 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.”^[4]

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.”^[5] (Emphasis added.) 

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:

1. Necessary (for the proper conduct of the sport);
2.  Suitable (as a means to pursue that necessary objective); and
3. Proportionate (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.”^[6] Galatasaray argued that EU law applied as FFP constitutes mandatory rules in EU territory. The parties agreed that Swiss law applied.

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:

i.       such rules belong to a special category of norms which need to be applied irrespective of the law applicable to the merits of the case;

ii.      there is a close connection between the subject matter of the dispute and the territory where the mandatory rules are in force; and

iii.    in view 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 effect”. Whether 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 anti-competitive effects.

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 by UEFA.

Fundamental Freedoms

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 “domestic operations” (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.

Swiss Law

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. 89). 

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?

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.

^[1] See, for example, Kuper, S and Szymanski, S 2012 Soccernomics 2nd ed. London: HarperSport at p14

^[2] See Kuper, S and Szymanski, S 2012 Soccernomics 2nd ed. London: HarperSport

^[3] It should be noted, however, that Mr Dupont has argued that a flat salary cap – in many ways more restrictive than the Break Even Requirement – would be preferable, see Stefano Bastianon, 'The Striani Challenge to UEFA Financial Fair-Play A New Era after Bosman or Just a Washout?' [2015] 11(1) The Competition Law Review 7-39 at p18

^[4] Daniel Geey, LawInSport and BASL Sport Law Year Book 2015 - 2016 (Sean Cottrell ed, LawInSport 2016) at p108

^[5] Para 50

^[6] Para 39