Asser International Sports Law Blog

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

Operación Puerto Strikes Back!

Forget the European Championship currently held in France or the upcoming Olympic Games in Rio. Doping scandals are making the headlines more than ever in 2016. From tennis star Sharapova receiving a two-year ban for her use of the controversial ‘meldonium’, to the seemingly never-ending doping scandals in athletics. As if this was not enough, a new chapter was added on 14 June to one of the most infamous and obscure doping sagas in history: the Operación Puerto.

The special criminal appeal chamber,  the Audiencia Provincial, has held that the more than 200 blood bags of professional athletes that have been at the center of the investigations since 2006 can be delivered to the relevant sporting authorities, such as the Spanish Anti-Doping Agency (AEPSAD), WADA, the UCI and the Italian Olympic Committee (CONI). In other words, there is now a good chance that the identities of the involved athletes might eventually be revealed.

Source: http://www.telegraph.co.uk/sport/othersports/cycling/9834122/Operation-Puerto-doctor-Eufemiano-Fuentes-treated-tennis-players-athletes-footballers-and-a-boxer.html

This case note will analyze the court’s ruling and summarize its most important findings. Given the amount of time passed since the scandal first came to light (2004), the blog will commence with a short background summary of the relevant facts. More...

FIBA/Euroleague: Basketball’s EU Competition Law Champions League- first leg in the Landgericht München. By Marine Montejo

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

On 3 June 2016, the Landgericht München (“Munich Regional Court”) ordered temporary injunctions against the International Basketball Federation (“FIBA”) and FIBA Europe, prohibiting them from sanctioning clubs who want to participate in competitions organized by Euroleague Commercial Assets (“ECA”). The reasoning of the Court is based on breaches of German and EU competition law provisions. FIBA and FIBA Europe are, according to the judge, abusing their dominant position by excluding or threatening to exclude national teams from their international competitions because of the participation of their clubs in the Euroleague. This decision is the first judicial step taken in the ongoing legal battle between FIBA and ECA over the organization of European basketball competitions.

This judgment raises several interesting points with regard to how the national judge deals with the alleged abuse of a dominant position by European and international federations. A few questions arise regarding the competence of the Munich Regional Court that may be interesting to first look at in the wake of an appeal before examining the substance of the case. More...

The Müller case: Revisiting the compatibility of fixed term contracts in football with EU Law. By Kester Mekenkamp

Editor’s note: Kester Mekenkamp is an LL.M. student in European Law at Leiden University and an intern at the ASSER International Sports Law Centre.

On 17 February 2016, the Landesarbeitsgericht Rheinland-Pfalz delivered its highly anticipated decision in the appeal proceedings between German goalkeeper Heinz Müller and his former employer, German Bundesliga club Mainz 05.[1] The main legal debate revolved around the question (in general terms) whether the use of a fixed term contract in professional football is compatible with German and EU law. 

In first instance (see our earlier blog posts, here and here), the Arbeitsgericht Mainz had ruled that the ‘objective reasons’ provided in Section 14 (1) of the German Part-time and Fixed-term Employment Act (Gesetz über Teilzeitarbeit und befristete Arbeitsverträge, “TzBfG”), the national law implementing EU Directive 1999/70/EC on fixed-term work, were not applicable to the contract between Müller and Mainz 05 and therefore could not justify the definite nature of that contract.[2] In its assessment the court devoted special attention to the objective reason relating to the nature of the work, declining justifications based thereupon.[3] Tension rose and the verdict was soon labelled to be able to have Bosman-like implications, if held up by higher courts.[4] More...

The BGH’s Pechstein Decision: A Surrealist Ruling



The decision of the Bundesgerichtshof (BGH), the Highest Civil Court in Germany, in the Pechstein case was eagerly awaited. At the hearing in March, the Court decided it would pronounce itself on 7 June, and so it did. Let’s cut things short: it is a striking victory for the Court of Arbitration for Sport (CAS) and a bitter (provisory?) ending for Claudia Pechstein. The BGH’s press release is abundantly clear that the German judges endorsed the CAS uncritically on the two main legal questions: validity of forced CAS arbitration and the independence of the CAS. The CAS and ISU are surely right to rejoice and celebrate the ruling in their respective press releases that quickly ensued (here and here). At first glance, this ruling will be comforting the CAS’ jurisdiction for years to come. Claudia Pechstein’s dire financial fate - she faces up to 300 000€ in legal fees – will serve as a powerful repellent for any athlete willing to challenge the CAS.More...



The EU State aid and Sport Saga: Hungary revisited? (Part 2)

On 18 May 2016, the day the first part of this blog was published, the Commission said in response to the Hungarian MEP Péter Niedermüller’s question, that it had “not specifically monitored the tax relief (…) but would consider doing so. The Commission cannot prejudge the steps that it might take following such monitoring. However, the Commission thanks (Niedermüller) for drawing its attention to the report of Transparency International.”

With the actual implementation in Hungary appearing to deviate from the original objectives and conditions of the aid scheme, as discussed in part 1 of this blog, a possible monitoring exercise by the Commission of the Hungarian tax benefit scheme seems appropriate. The question remains, however, whether the Commission follows up on the intent of monitoring, or whether the intent should be regarded as empty words. This second part of the blog will outline the rules on reviewing and monitoring (existing) aid, both substantively and procedurally. It will determine, inter alia, whether the State aid rules impose an obligation upon the Commission to act and, if so, in what way. More...

The Rise and Fall of FC Twente

Yesterday, 18 May 2016, the licensing committee of the Dutch football federation (KNVB) announced its decision to sanction FC Twente with relegation to the Netherland’s second (and lowest) professional league. The press release also included a link to a document outlining the reasons underlying the decision. For those following the saga surrounding Dutch football club FC Twente, an unconditional sanction by the licensing committee appeared to be only a matter of time. Yet, it is the sanction itself, as well as its reasoning, that will be the primary focus of this short blog.More...

The EU State aid and Sport Saga: Hungary’s tax benefit scheme revisited? (Part 1)

The tax benefit scheme in the Hungarian sport sector decision of 9 November 2011 marked a turning point as regards the Commission’s decisional practice in the field of State aid and sport. Between this date and early 2014, the Commission reached a total of ten decisions on State aid to sport infrastructure and opened four formal investigations into alleged State aid to professional football clubs like Real Madrid and Valencia CF.[1] As a result of the experience gained from the decision making, it was decided to include a Section on State aid to sport infrastructure in the 2014 General Block Exemption Regulation. Moreover, many people, including myself, held that Commission scrutiny in this sector would serve to achieve better accountability and transparency in sport governance.[2]

Yet, a recent report by Transparency International (TI), published in October 2015, raises questions about the efficiency of State aid enforcement in the sport sector. The report analyzes the results and effects of the Hungarian tax benefit scheme and concludes that:

“(T)he sports financing system suffers from transparency issues and corruption risks. (…) The lack of transparency poses a serious risk of collusion between politics and business which leads to opaque lobbying. This might be a reason for the disproportionateness found in the distribution of the subsidies, which is most apparent in the case of (football) and (the football club) Felcsút.”[3]

In other words, according to TI, selective economic advantages from public resources are being granted to professional football clubs, irrespective of the tax benefit scheme greenlighted by the Commission or, in fact, because of the tax benefit scheme. More...

International and European Sports Law – Monthly Report – April 2016. By Marine Montejo

Editor’s note: This report compiles all relevant news, events and materials on International and European Sports Law based on the daily coverage provided on our twitter feed @Sportslaw_asser. You are invited to complete this survey via the comments section below, feel free to add links to important cases, documents and articles we might have overlooked.  


The Headlines

This month saw the conflict between FIBA Europe and the Euroleague (more precisely its private club-supported organizing body, Euroleague Commercial Assets or ‘ECA’) becoming further entrenched. This dispute commenced with FIBA creating a rival Basketball Champions League, starting from the 2016-2017 season with the hope to reinstate their hold over the organization of European championships. The ECA, a private body that oversees the Euroleague and Eurocup, not only decided to maintain its competitions but also announced it would reduce them to a closed, franchise-based league following a joint-venture with IMG. In retaliation, FIBA Europe suspended fourteen federations of its competition (with the support of FIBA) due to their support for the Euroleague project.More...


The boundaries of the “premium sports rights” category and its competition law implications. By Marine Montejo

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

In its decisions regarding the joint selling of football media rights (UEFA, Bundesliga, FA Premier league), the European Commission insisted that premium media rights must be sold through a non-discriminatory and transparent tender procedure, in several packages and for a limited period of time in order to reduce foreclosure effects in the downstream market. These remedies ensure that broadcasters are able to compete for rights that carry high audiences and, for pay TV, a stable number of subscriptions. In line with these precedents, national competition authorities have tried to ensure compliance with remedy packages. The tipping point here appears to be the premium qualification of sport rights on the upstream market of commercialization of sport TV rights.

This begs the question: which sport TV rights must be considered premium? More...

Guest Blog - Mixed Martial Arts (MMA): Legal Issues by Laura Donnellan

Editor's note: Laura Donnellan is a lecturer at University of Limerick. You can find her latest publications here.


Introduction

On Tuesday the 12th of April, João Carvalho passed away in the Beaumont Hospital after sustaining serious injuries from a mixed martial arts (MMA) event in Dublin on the previous Saturday. The fighter was knocked out in the third round of a welterweight fight against Charlie Ward. Aside from the tragic loss of life, the death of Carvalho raises a number of interesting legal issues. This opinion piece will discuss the possible civil and criminal liability that may result from the untimely death of the Portuguese fighter.

It is important to note at the outset that MMA has few rules and permits wrestling holds, punching, marital arts throws and kicking. MMA appears to have little regulation and a lack of universally accepted, standardised rules. There is no international federation or governing body that regulates MMA. It is largely self-regulated. MMA is not recognised under the sports and governing bodies listed by Sport Ireland, the statutory body established by the Sport Ireland Act 2015 which replaced the Irish Sports Council. MMA is considered a properly constituted sport so long as the rules and regulations are adhered to, there are appropriate safety procedures, the rules are enforced by independent referees, and it appropriately administered.

The Acting Minister for Sport, Michael Ring, has called for the regulation of MMA. Currently there are no minimum requirements when it comes to medical personnel; nor are there any particular requirements as to training of medical personnel. The promoter decides how many doctors and paramedics are to be stationed at events. In February 2014 Minister Ring wrote to 17 MMA promoters in Ireland requesting that they implement safety precautions in line with those used by other sports including boxing and rugby.

Despite this lack of regulation, this does not exempt MMA from legal liability as the discussion below demonstrates.More...



Asser International Sports Law Blog | Blog Symposium: The Impact of the TPO Ban on South American Football. By Ariel N. Reck

Asser International Sports Law Blog

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

Blog Symposium: The Impact of the TPO Ban on South American Football. By Ariel N. Reck

Introduction: FIFA’s TPO ban and its compatibility with EU competition law.
Day 1: FIFA must regulate TPO, not ban it.
Day 2: Third-party entitlement to shares of transfer fees: problems and solutions
Day 4: Third Party Investment from a UK Perspective.
Day 5: Why FIFA's TPO ban is justified.

Editor’s note: Ariel N. Reck is an Argentine lawyer specialized in the football industry. He is a guest professor at ISDE’s Global Executive Master in International Sports Law, at the FIFA CIES Sports law & Management course (Universidad Católica Argentina) and the Universidad Austral Sports Law diploma (Argentina) among other prestigious courses. He is a regular conference speaker and author in the field of sports law.

Being an Argentine lawyer, Ariel will focus on the impact FIFA’s TPO ban will have (and is already having) on South American football.


Introduction

Before discussing the impact of the TPO ban, it is important to highlight that the purposes of TPO in South America are somehow different than in Europe. Here “economic rights” (that’s how we call it) are basically assigned in four different moments and/or situations:

First, when a youth player is first registered for the club at amateur level. This is a recognition to the person or entity that brings the player to the club and is usually between 10% and 20% of a future transfer. This practice widens the club’s scouting net and attracts promising young players from the small clubs to the big ones. The percentage can be assigned to the former club of the player, a third person who brings the player (a scout / intermediary) or to the player’s family if he comes as a free or unregistered player. In these cases the position of the beneficiary is really passive and the assigned rights are fragile and dependent of many factors (the player is not even a professional yet).

A second stage in which rights are assigned to third parties is when the club needs money to cover other obligations, unrelated to that particular player. Every club has one or more starlets and investors are willing to take the risk and acquire a percentage of the player’s economic rights. For the club, the sale of portions of the economic rights helps to balance its books and provides an alternative source of credit. In this case there’s no “standard” percentage, it depends on the money the investor is willing to pay, the potential value of the player and the needs of the club. The influence, or the ability to “force” a transfer of the player, of the third party is also subject to each particular agreement, with a direct correlation between percentage owned and influence.[1]

The third situation is when a club wants to hire a player but does not have the financial resources to do it. The rights of such a player might be owned by a company or a company might be willing to acquire the player’s rights from the former club and bring him to the new club. Consequently, the new club is used as showcase only. Under this situation, the player is usually hired for a single season with an option for the purchase of a percentage in favor of the new club, triggering –if executed- a long term employment contract. Sometimes, even if the option is not executed the TP owner recognizes the club a small percentage (around 10%) as “showcase rights” in case the player is immediately hired with a long term contract by another club after the termination of his one season contract. Under these circumstances, the influence of the TP owner is clearly strong, irrespective of how the relevant documents are drafted. 

Clubs could also turn to selling economic rights to third parties in order to cancel debts or to seduce a player for a contractual renewal. A club accepts to assign a share to the player against previous salary debts or in order to convince him to renew the contract without a mayor salary raise. If the club cannot pay the amounts wanted by the player to renew, it offers to assign the player a percentage of his own transfer. In most South American countries, the law or a collective bargaining agreement grants players a minimum percentage of the proceeds of his own transfer (between 10% and 20% depending the country)[2], but this additional assignment is heavily used to satisfy a player’s demands at a renewal of the employment contract.

With so many purposes, and taking into account the financial needs of clubs, the lack of alternative sources of financing and the number of South American players transferred each year, it is obvious that the use of TPO in South America is definitively widespread. Therefore, the impact of the ban will be certainly important, especially in the first years when clubs have not yet found alternative forms of financing.  


The impact of the FIFA Ban

The situation is aggravated by the short transitional period established by FIFA. While previous statements of FIFA officials suggested a period of 3 to 4 seasons[3], the FIFA Circular letter 1264 reduced it to just four months.

It is hard to predict the effectiveness of the prohibition. The current scenario shows many parties looking for forms or mechanisms to circumvent the prohibition, while others are trying to challenge it before the courts. If we consider the experience of art.18bis of the FIFA Regulations on the Status and Transfer of Players (RSTP) (an article included in the FIFA rules right after the Tévez affair as an attempt to protect the independence of clubs in its transfers decisions limiting the power to force a transfer, third parties usually had in TPO agreements), the forecast for the effectiveness of art.18ter is not good. But, as we will show, in the case of art.18ter there’s a clear new impulse and moreover, UEFA stands strongly behind the prohibition. Therefore, in my opinion, we can expect a different outcome. I think the ban will be especially effective in cases of players involved in transfers from South America to the European leagues. Transfers to Portugal, Spain or Greece (countries that relied on TPO in the recent past) will be heavily scrutinized. Nonetheless, it is unclear whether at domestic level, especially in South America, the practice will be banned with similar efficiency or if it will continue secretly with limited or no control by the national Associations. Some federations already implemented their own form of TPO ban (even when art.18ter RSTP is mandatory at national level). Brazil was one of the pioneers[4] and in Argentina, the fiscal authorities, passed a regulation banning TPO agreements.[5]

As to the ways to try to circumvent the TPO ban, I think we will see a raise in the use of “bridge transfers”, which is basically the registration of a player in a club just to cover the TPO with a federative “shell”. With this maneuver, the TP owner artificially enjoys all the benefits of being a club, like retaining a percentage of the player’s future transfer or controlling the player’s career by signing a long term contract with a huge buyout clause loaning the player to different clubs each year.[6] According to the FIFA regulations any club that had ever registered the player is not a “third party” (see definition 14[7]). There is no further requirement, no “sporting interest” in the registration or playing time, the simple act of registration allows a club to have a share of the player’s future transfers. To this regard, while it is true that FIFA already sanctioned clubs for “bridge transfers”[8], it was only an isolated case (still pending at CAS) and we can see examples of patent “bridge transfers” in every transfer window and in the top-5 leagues, not just in minor competitions. 

Another way to deceive TPO is to assign a share to the player and a further (hidden) assignment from the player to a third party. At this point, a big question arises: is the player a third party according to the FIFA regulations? Can a club assign a percentage of the player’s future transfers to the player himself?
As said, the opportunity for a player to profit from his own transfer is a labour right in many South American countries. While South American employment laws, statutes and/or CBAs tend to fix a minimum percentage of the transfer fee for the player, there is no cap and in theory a player can receive up to 100% of the transfer price. 

The FIFA regulations only exclude the two clubs involved in a transfer and the previous clubs where the player was registered from being a third party. Hence, in principle, the player seems to be a “third party” too.

But art.18ter provides that no club or player shall enter into an agreement with a third party, based on the wording of this provision it is clear that a player should not be considered a “third party”. Moreover, the player is a necessary party in every transfer agreement and he is also subject to sanctions if he violates the aforementioned FIFA prohibition on TPO according to paragraph 6 of art.18ter.

In addition, the fact that in many South American countries the player’s entitlement to a share of his own transfer is a labour right, a systematic interpretation of art.18ter makes it plausible to sustain the validity of the assignment of a percentage of the transfer fee to the player. In that regard, it is important to recall that FIFA’s prohibition has in principle effect only at federative level. This means that at civil level, any assignment will still be valid and enforceable.

Furthermore, the jurisprudence of the majority of the South American countries holds that federative rules have only effect within the framework of the federation and cannot contradict the civil legislation, of a higher hierarchy.

Argentina is an exception in South America. Ordinary Argentine courts settled that Federative rules are the “lex specialis” in relation to the general rules of the civil code. Therefore, if the regulations of FIFA and/or the Argentine Federation prohibit TPO, any contract in that sense will be null and void, even when under our civil code the assignment of a future transfer is perfectly valid.

Saved for this exception, the result of this is that FIFA’s remedy might be worse than the disease. Since FIFA can only sanction its own members (meaning clubs and players), if a club or a player enters into a TPO agreement, such player or club might be subject to disciplinary sanctions and the contract will still be valid and enforceable.

It is not unthinkable that a player or a club surrendering to the need of funds and signing a TPO agreement despite FIFA’s ban, thereby placing himself in a difficult position. The counterpart (the third party) might force the compliance of the agreement by threatening with reporting the deal to FIFA. In the end, the ban will have the opposite effect to what was sought: Players and clubs will be more vulnerable in their relationship with the third-party than before the introduction of art.18ter RSTP.

As said, it is hard to think that clubs will immediately find an alternative source of funding or will be able to live within their own means. Therefore, it is probable that clubs will try to circumvent or challenge the rule.

Again, the final consequences are hard to predict, but will of an important magnitude. TPO is not just a financing method ‎to bring players to clubs, sharing the risk with the investor, it is also a way to get cash-flow without the need to transfer the player to another club. Furthermore, it is an essential part of the scouting method that widens the club’s network, attracts young talents to the clubs and is also a way to cancel debts towards the player or to achieve a renewal of his contract.  


Conclusion

To conclude, I don’t think the TPO ban is the best way to achieve the –alleged- objectives declared by FIFA. Obligation to disclose, controlled payments (via TMS for example) and other regulatory approaches would have been better options. The pressure from an investor could have been diluted by setting a limit (maximum percentage or maximum number of players under TPO) and the reality is that the pressure to “force” a transfer comes in general from other actors, mainly the player and/or his agent. 

Now the new “pushers” will be the European clubs. How will it be possible for an Argentine club to refuse a -say- € 5 million transfer for a 19 year old player even if the club knows his value will double or triple if he stays at the club? With the TPO ban the club cannot rely on an investor paying, for example, € 3 million for 50% of the player's economic rights to “hold on” a few years. It is worth remembering that Chelsea tried to seal the transfer of Neymar for € 20 million when he was 18. However, Santos managed to reject such offer relying on TPO.

South American players account already for approximately 25% of all the international transfers worldwide[9], after the TPO ban this percentage will certainly raise.

As to the “morals” arguments, recently reiterated by UEFA’s president Platini who said TPO is “a form of slavery”[10], I believe they are just a fallacy. Every transfer needs the player’s consent and the investor owns a share of the profit of a potential future transfer, not a part of the human being. Otherwise, for clubs, owning 100% of a human being would be equally immoral.

Moreover, other types of assignments, like third party litigation funding, are legal in many countries, including the UK and France. The similarities and analogies than can be made with TPO are immense and nobody is claiming third party litigation funding is a way of “owning a person’s justice”.

With the introduction of the Financial Fair Play Regulations European clubs and federations are looking into ways to reduce expenditures and also scrutinizing what the “neighbors” are doing. Clubs want cheaper players and clubs from countries were TPO was long ago banned had a handicap for UEFA spots against clubs from countries were TPO was allowed and relied on TPO to acquire players.[11] The TPO ban serves both objectives: A reduction in the player’s transfer price and an end to the Spanish and Portuguese transfer “tactics” that relied heavily on TPO. 

Also, the inclusion or exclusion of the player in the definition of “third party” triggers conflictive issues. In most South American countries national labour laws or CBAs allow the player to obtain a percentage of the proceeds of his own transfer. If FIFA tries to extend the definition of “third party” to include players, this might certainly prevent a complete implementation of FIFA´s TPO ban in South America. 

As a conclusion I can say that, for South American clubs, the TPO ban just changed the “predator” in the transfer market. Our clubs can now stand stronger against investors, but as counter-effect they are in a much weaker position against European clubs‎.



[1] For a discussion on “buy-sell” clauses (the core of any TPO agreement) and whether they constitute prohibited influence see my opinion: Do “Buy-Sell” Clauses In Third Party Ownership Agreements Constitute Undue Influence Under FIFA’s Art 18bis?

 http://www.lawinsport.com/blog/argentine-sports-law-blog/item/do-buy-sell-clauses-in-third-party-ownership-agreements-constitute-undue-influence-under-fifa-s-art-18bis

[2] Brazil, Peru and Bolivia are exceptions to this rule; no such right is established in their regulations. In Argentina the minimum percentage is 15% according to art.8 of the CBA 557/2009 http://infoleg.mecon.gov.ar/infolegInternet/anexos/155000-159999/158453/norma.htm , in Paraguay 20% for international transfers, art.12 law 5322 from 29th  October 2014 http://www.escritosdederecho.com/2014/11/ley-5322-del-29-10-2014-estatuto-del-futbolista-profesional.html , in Uruguay 20%, art.34 of the Professional Footballers Statute http://www.mutual.com.uy/index.php?option=com_content&view=article&id=49&Itemid=83 , in Ecuador 15%, Chile 10% law 20.178 http://www.sifup.cl/wp-content/uploads/2014/12/Ley-20178-Estatuto-Laboral-del-Futbolista-Profesional-Chileno.pdf , and Colombia 8% art.14 Colombian Players Status Regulations http://fcf.com.co/index.php/la-federacion-inferior/normatividad-y-reglamento/158-estatuto-del-jugador

[3] http://www.fifa.com/aboutfifa/organisation/footballgovernance/news/newsid=2463828/

[4] http://www.insideworldfootball.com/world-football/south-america/16188-brazil-conforms-and-sets-date-for-ending-tpo-funding-practices

[5] General Resolution 3740/2015 http://eco-nomicas.com.ar/7183-rg-3740-afip-ganancias-transferencia-de-jugadores

[6] For more on “Bridge Tranfers” http://www.lawinsport.com/sports/football/item/what-is-a-bridge-transfer-in-football

[7] Third party: a party other than the two clubs transferring a player from one to the other, or any previous club, with which the player has been registered.”

[8] http://www.fifa.com/aboutfifa/organisation/news/newsid=2292724/index.html

[9] Source: FIFA TMS Global Transfer Market Report 2015, page 78.

[10] http://in.reuters.com/article/2015/03/16/soccer-platini-tpo-idINKBN0MC1B220150316

[11] http://www.e-comlaw.com/world-sports-law-report/article_template.asp?Contents=Yes&from=wslr&ID=1388

 

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