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

Introducing the new legal challenges of E-Sports. By N. Emre Bilginoglu

Editor’s Note: Emre Bilginoglu[1] is an attorney in Istanbul and the co-founder of the Turkish E-Sports Players Association, a non-profit based in Istanbul that aims to provide assistance to professional gamers and to work on the relevant laws affecting them. 


The world is witnessing the rise of a new sport that is growing at an incredible speed: E-Sports. We are only starting to understand its legal implications and challenges.

In recent years, E-Sports has managed to attract thousands of fans to arenas to see a group of people play a video game. These people are literally professional gamers (cyber athletes)[2] who make money by competing in tournaments. Not all video games have tournaments in which professional players compete against each other.

The most played games in E-Sports competitions are League of Legends (LoL), Defense of the Ancients 2 (DotA 2) and Counter-Strike: Global Offensive (CS:GO). LoL and DotA are both Multiplayer online battle arena (MOBA) games, a genre of strategy video games in which the player controls a single character in one of two teams. The goal of the game is to destroy the opponent’s main structure. CS:GO is a first-person shooter (FPS) game, a genre of video games where the player engages combat through a first-person perspective. The main objective in CS:GO is to eliminate the opposing team or to terrorize or counter-terrorize, planting bombs or rescuing hostages. Other games that have (popular) E-Sports competitions include Starcraft II (real time strategy), Hearthstone (collectible card video game), Call of Duty (FPS) and FIFA (football).

The gaming requires cooperation between team players, a high level of concentration, rapid reactions and some seriously fast clicking. E-Sports is a groovy term to describe organized competitive computer gaming. The E-Sports industry is exponentially growing, amounting to values expressed in billions of dollars. According to Newzoo, a website dedicated to the collection of E-Sports data, there are some 250 million occasional viewers of E-Sports with Asia-Pacific accounting for half of the total amount. The growth of the industry is indubitably supported by online streaming media platforms. This article aims to explain what E-Sports is and to give the readers an insight on the key legal questions raised by it. 


Is E-Sports a Sport?

The introductory legal question regarding E-Sports is whether it is a sport. There are different definitions of “sport”. According to the Council of Europe, “sport” means all forms of physical activity which, through casual or organised participation, aim at expressing or improving physical fitness and mental well-being, forming social relationships or obtaining results in competition at all levels.

SportAccord a non-profit association which is composed of autonomous and independent international sports federations and other international organisations contributing to sport in various fields, also offers a definition of sport. According to this definition, sport:

1) includes an element of competition;

2) does not rely on any element of “luck” specifically integrated into the sport;

3) does not pose an undue risk to the health and safety of its athletes or participants;

4) is in no way harmful to any living creature;

5) and does not rely on equipment that is provided by a single supplier.


Sport categories designated by SportAccord are primarily: physical sports (e.g. basketball); mind sports (e.g. chess); motorized sports (e.g. motorcycle racing); coordination sports (e.g. snooker); and animal-supported sports (e.g. equestrianism).

SportAccord also states that activities with limited physical or athletic activity would be carefully considered. E-Sports indeed involves a limited physical activity. The professional gamer generally sits in front of a designated computer. However, at this point it is important to highlight the existence of multiplayer video games that involve a considerable amount of physical activity. Home video game consoles that detect movement were released in early 2000s, paving the way for true E-Sports cyber athletes in the near future. Until now however, games that require physical activity have not been played at a professional level.

Having said this, E-Sports does involve a clear element of competition, does not rely only on luck, does not pose an undue risk to the health and safety of its competitors and is not harmful to any living creature. At some point, it does rely on equipment that is provided by a single supplier, as the subject game that is played is in general produced by a single supplier. In other words, E-Sports clearly complies with the remaining criteria (2 to 5) suggested to be defined as a “sport”.

Even though there are a myriad of multiplayer games, one mostly categorizes E-Sports as a primarily mind and coordinated sport. It does not require lots of physical activities except for very fast finger movement. A similar sport is chess. It is challenging to oppose the argument of David Papineau, professor of philosophy of science at King’s College London, who, as regards chess, said that “(t)he activity is playing a game, therefore it is not a sport but a game”. However, chess is a strategy board game and at the same time it is an organized sport with an international governing body, namely FIDE.


Can E-Sports Be an Olympic Sport?
The International Olympic Committee (IOC) is the supreme authority of the Olympic movement. The IOC decides which sports are included in the Olympic Games. Choices of the IOC always bring forth discussions and debates in the sports community. Some sports are discontinued and some are re-introduced. Wrestling was announced to be dropped from the 2020 Olympic Games in 2020, but was reinstated seven months after losing its place. Even though wrestling is one of the founding sports of the Olympics, the IOC could have removed it from the Olympic Games. The IOC recently reinstated baseball and softball, and added skateboarding -, karate, climbing and surfing- to the sports programme for the Olympic Games in Tokyo 2020. Therefore, it is possible to say that popularity is one of the crucial elements for a sport to be included to the Olympic Games. Chess, led by FIDE, is attempting to be an Olympic Sport. Although the attempt for Tokyo 2020 was not successful, things may change in the future.

In my opinion, E-Sports can very well be regarded as an Olympic sport in the near future. Whatever game that is played on a professional level, may be regarded as its discipline. The crucial setback is the perishability of games. Video games become “obsolete” with time. This is especially the case with sports games. Squads and the game play changes every season. That is one of the reasons why FIFA releases a new video game every single year. Therefore, video games such as FIFA are unlikely to make it to the top E-Sports games awarding prize money.


What type of Governance for E-Sports ?

The formation of a single internationally recognized E-Sports federation would be a first step in a long journey to reach the Olympics. Currently however, several international E-Sports organizations exist.

In South Korea, where E-Sports is what football is to Brazil, the South Korean E-Sports Association was founded in 2000. The Association regulates the working conditions of cyber athletes. The highest earnings in E-Sports by countries are listed as: China, the United States, South Korea, Sweden and Canada. As for international associations, three of them need to be mentioned.

First, there is the World E-Sports Association (WESA), founded in 2016 by a group of E-Sports teams and ESL (i.e. largest video game event company in the world). WESA aims to professionalize the industry, regulating matters regarding revenues and schedules. WESA even has an internal arbitration court, namely WESA Arbitration Court. It operates independently from WESA and is open to everyone involved in E-Sports, such as players, teams, organizers and publishers.

The second is the International e-Sports Federation (IeSF), an international organization based in Seoul, South Korea. A total of 46 nations are member of the IeSF. It has listed seven objectives in its Statute, the first one being as follows: to “constantly improve e-Sports and promote it in the light of its values - humanitarian, educational, cultural, unity of purpose and ability to promote peace”. IeSF is a signatory of the World Anti-Doping Code (WADC). ESL also endorsed the WADC and conducts doping tests on cyber athletes. Stimulants- drugs that improve reaction time and concentration are prohibited.

The third association worth mentioning is the International eGames Committee (IEGC), a non-profit E-Sports organization, supported by the government of the United Kingdom. It aims to positively shape the future of competitive gaming.

In my view, countries that seek to be a part of the E-Sports world should establish their own national federations and apply to IeSF. IeSF should collaborate with WESA, which is founded by the most significant organizations in the industry. IeSF is capable of growing into an internationally recognized authority that is in charge of international competitions between national teams, whereas WESA would be in charge of all competitions between clubs.


E-Sports and Free Speech
Since there is a certain amount of (virtual) killing and planting bombs involved, some games are not suitable for children. Deciding who can play which game is up to certain institutions around the world. One of them is Pan European Game Information (PEGI). PEGI is the age rating system for video games in Europe, Israel and Quebec. The Entertainment Software Rating Board (ESRB) is another institution providing an age rating system for video games, this time for North America. PEGI and ESRB standards are generally not legally binding. PEGI standards are legally enforced in few jurisdictions, one being the United Kingdom. Another example is Austria. In Austria, protection of minors are implemented by states. Two of the nine states, Vienna and Carinthia, legally adopted PEGI standards.

California passed a law that prohibited the sale of certain video games to minors. It was struck down by the U.S. Supreme Court. The Supreme Court ruled that video games were protected speech under the First Amendment.[3] The Supreme Court had its own reasons, such as “Psychological studies purporting to show a connection between exposure to violent video games and harmful effects on children do not prove that such exposure causes minors to act aggressively.or “This country has no tradition of specially restricting children’s access to depictions of violence.”


E-Sports and IP Law
Apart from constitutional law, video games can be subject to other fields of the law. Intellectual property law is one of such fields. For example, DotA is a fan-made custom map originated with Warcraft III, a strategy video game created by Blizzard Entertainment. It was not a separate game until published by Valve Corporation as Dota 2. Blizzard sought to prevent registration by its competitor Valve of the trademark Dota by resorting to the United States Patent and Trademark Office. Subsequently, Blizzard and Valve reached a settlement agreement and Valve went on to publish Dota 2.

Playing Dota 2 is free of charge and Valve speedily hosted its first competition in 2011, with a prize pool of 1.6 million dollars. The International became an annual Dota 2 E-Sports tournament. The prize pool for the tournament in 2016 was approximately 20 million dollars. The team Wings Gaming of China completed the tournament in first place and was awarded 9.1 million dollars. The final was viewed by almost 6 million spectators. Dota 2 tournaments have awarded a total prize money of approximately 90 million dollars so far. League of Legends took the second place with 36 million dollars, followed by Counter Strike: GO (nearly 27 million dollars) and Starcraft II (nearly 22 million dollars). 


E-Sports Clubs, Athletes and the Law
The E-Sports teams that participate in these kind of high level competitions have different rosters for different games. They are starting to become more and more important business entities with their superstar players. The teams are mainly sponsored by tech firms, consumer electronics companies, gaming equipment producers, web hosting companies, automobile manufacturers, energy drinks manufacturers and business people who dream of owning a sports team but who cannot afford to acquire a professional football club. Football clubs themselves are also keen on forming their own E-Sports club, not only limited to football games. PSG (FIFA, LoL, Starcraft, CS, Call of Duty and Hearthstone) Schalke 04 (LoL) and Manchester City (FIFA) have already signed their own E-Sports players. Besiktas was the first football club in the world to form an E-Sports team in 2015. Fenerbahce has also entered the arena in 2016 and will be competing in the upcoming Turkish League of Legends season with a roster of accomplished players. As for football, FIFA and EA Sports organise the FIFA Interactive World Cup 2017. FIFA announced that the winning prize would be 200 thousand dollars.

High level cyber athletes are mostly men. However, the industry is trying to tackle gender discrimination and promote women cyber athletes. Cyber athletes sign contracts with their teams and sometimes receive salaries from video game developers. The developer of League of Legends, Riot Games chooses to pay salaries to competitors. Cyber athletes may want to make some extra money by streaming on online platforms, an important issue while drafting a contract. Therefore, E-Sports concerns both labor law and contract law. It also concerns criminal law, as there have been several incidents of betting-related match-fixing in E-Sports. In one such case, the manager of a LoL club was inciting his players to lose against big teams, claiming that the organizers would kick them out of the league should they win. The players allegedly did so, believing their manager. In the end, the manager was found to be betting against his own team, which finished the season with no wins. A player of the team attempted suicide, leaping off a building. Fortunately, he survived. In another case, a Dota 2 player placed a bet against his own team in a major event and won $322. “322” is now a nickname for players who deliberately fail in a game.

In Turkey, where I practice law, E-Sports players became athletes licensed by the “Federation of Developing Sports”, established by the Sports Ministry. There are about three thousand licensed players. The level of professionalism in elite clubs is surprising, and they are actually pretty successful in international tournaments. Space Soldiers (CS:GO), SuperMassive (LoL) are followed by tens of thousands of fans, even though they were founded only a few years ago.

The primary concern of the athletes and their families in general is the lack of opportunities after their brief but intense careers. Successful cyber athletes require a superordinate level of reactions and excellent reflexes. These attributes become slower with time. Consequently, cyber athletes are usually active between the ages 18-23. It is arduous for them to find time to study, as they need at least eight hours of training per day. National legislators around the world should also focus on devising E-Sports regulations, as more and more professional contracts are being signed. Cyber athletes are transferred from clubs to other clubs as in any other sport and foreign cyber athletes may encounter problems regarding their visas. France recently tackled the legal vacuum and granted a specific legal status for cyber athletes.


Conclusion
Call it a sport or not, E-Sports is growing exponentially. It is an industry worth billions and watched by millions. Although the industry is a commercial success, there are still lots of legal issues to tackle. These legal issues fall within the scope of various fields of law causing lawyers to work on improving their respective national laws.

Transfers of cyber athletes, drafting contracts for cyber athletes and the resolution of contractual disputes are some of the key issues, as well as tackling doping and match-fixing, intellectual property rights, broadcasting rights in particular, and the exploitation of minors or professional gamers. WESA and IeSF are significant international organizations that can endeavor on unifying E-Sports regulations and tackling legal problems faced by the players and the clubs.

The 21st century will offer more new games to play. Considering the current growth in the industry, I would dare predict that the industry will be worth hundreds of billions in the near future. I would recommend the countries and E-Sports governing bodies leading the industry to work together and bring forth certain essential regulations. This would also benefit game developers, as their games and gamers would find a place in the industry on a legal basis. I would also suggest the industry to incite women cyber athletes and facilitate their involvement in professional competitions, so that possible instances of discrimination are proactively precluded.




[1] Nurettin Emre Bilginoglu, LLM, Attorney-at-law - Istanbul, Turkey.  E-mail: emre@caglayanyalcin.com.

[2] Although there is no precise definition of a “professional E-Sports player”, the approach of FIFA could be deemed applicable by analogy. According to Article 2 of FIFA Regulations on the Status and Transfer of Players, a professional is a player who has a written contract with a club and is paid more for his footballing activity than the expenses he effectively incurs. In E-Sports, certain players are paid more for their gaming activities than the expenses they incur.

[3] Brown v. Entertainment Merchants Association, 564 U.S. 786 (2011).

Comments (1) -

  • Adem Yaşar

    2/6/2017 4:55:32 PM |

    A new milestone has been recorded in the history of eSports. So, that is very good to deal with this matter in terms of legal implications.
    Good luck from Heidelberg University

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Asser International Sports Law Blog | 20 Years After Bosman - The New Frontiers of EU Law and Sport - Special Issue of the Maastricht Journal of European and Comparative Law

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

20 Years After Bosman - The New Frontiers of EU Law and Sport - Special Issue of the Maastricht Journal of European and Comparative Law

Editor's note: This is a short introduction written for the special Issue of the Maastricht Journal of European and Comparative Law celebrating the 20 years of the Bosman ruling and dedicated to the new frontiers of EU law and Sport (the articles are available here). For those willing to gain a deeper insight into the content of the Issue we organize (in collaboration with Maastricht University and the Maastricht Journal) a launching event with many of the authors in Brussels tomorrow (More info here).



 20 Years After Bosman - The New Frontiers of EU Law and Sport

By Antoine Duval

The Bosman ruling is not just another ruling of the Court of Justice of the EU (CJEU), it is by far the most well-known decision of the Court outside of the Euro-bubble.[1] In the UK the phrase ‘a Bosman’ is commonly used to qualify the free move of a football player to a new club at the end of his contract. Beyond its anchoring in the English idiom, Bosman stands out as a shared European reference. However, it is often – misleadingly - credited for all the ills and wrongs of football. In any case, it is part and parcel of the European (even worldwide) public debate on football and its regulation. If a European public sphere is to emerge at some point, the heated public discussion that was triggered in Europe by Bosman is probably an avant-goût of it. Therefore, 20 years after the ruling, the least a European sports lawyer and academic can do, is to acknowledge ones indebtedness and, to some extent, gratitude for this ruling.

One aspect that needs to be emphasized is that Bosman is not an instrument with the paramount objective to deregulate the football market or the world of sport in general. It is not, as many on the side of the Sports Governing Bodies (SGBs), and FIFA and UEFA in particular, have portrayed it, a decision aimed at destroying the transnational legal system (also known as lex sportiva) they had put in place to coordinate the organization and unfolding of transnational sporting competitions. On the contrary, SGBs have the possibility to justify their rules and regulations. As Stephen Weatherill rightly pointed out long ago, the only requirement SGBs have to fulfil to ensure that their regulations comply with EU law is to explain convincingly why they are needed.[2] Thus, a constructive (and positive) perspective on Bosman stresses its constitutional over its deregulatory function. Private regulations adopted by private powers, which are not particularly renowned for the quality of their governance, need to be subject to checks and balances. After Bosman, the EU free movement rights and competition law have impersonated such a check on (or counter-power to) the rules privately adopted and enforced by SGBs. In fact, it is here that the true, long-lasting legacy of Bosman lies.

This issue brings together a mixed line-up of both young and established scholars, sports law experts and EU law specialists, to discuss the legacy of Bosman and the future of the relationship between EU law and sport. Besides the synthetic and comprehensive introductory piece of Stefaan Van Den Bogaert that brings us back to the original crusade of Mr Bosman, all the contributions are geared towards the recent and future legacies of the ruling. A broad range of legal problems raised by the interaction of EU law and sport is touched upon. 

In the first article, Ben Van Rompuy builds on Advocate General Lenz’s conclusions in Bosman, the following practice adopted by the EU Commission as well as on the case law of the CJEU on competition law and sport to argue that competition law can be a powerful tool to impose a legal check on the regulatory practices of SGBs.

In the second piece, Phedon Nicolaides analyses a relatively new front line between EU law and sport: state aid. Although not directly connected to Bosman, state aid cases are taking a prominent place in the practice of the EU Commission in the field of sport. In fact, state aid law has become a useful legal proxy to control the way public authorities decide to support economically sporting organizations and their events.

The third piece by the editor of this issue is dedicated to the interaction between the Court of Arbitration for Sport (CAS) and EU law. Indeed, the emergence of the CAS is probably the most important institutional legacy of Bosman, and EU law now has a role to play in exercising a form of ‘Solange’ control over CAS’s judicial activity.

In the fourth article, which follows most clearly into the footpath of Bosman, Richard Parrish discusses the compatibility of the FIFA Regulations on the Status and Transfers of Players (RSTP) with EU law. He suggests that the RSTP as it stands can be deemed contrary to EU law.

The fifth article of the issue by Jacob Kornbeck, a former member of the sports unit of the European Commission, analyses the role of the Commission in the drafting process of the new World Anti-Doping Code recently adopted by the World Anti-Doping Agency. He highlights that the ethos of Bosman spread to other spheres of action of the EU in sport and shows concretely in what way it influenced the position of the EU in the negotiations over the new Code that entered into force in January 2015. Finally, Anna Sabrina Wollmann, Olivier Vonk and Gerard-René de Groot look at the growing problem of nationality requirements in sports. If Bosman stands more particularly for an Europeanization of football, globalization and the ease of cross-border movement for professional sportspeople have heightened the question of the sporting nationality of athletes worldwide. This contribution critically analyses the many calls for a separate sporting nationality and proposes an alternative path.


[1] Case C-415/93 Union royale belge des sociétés de football association ASBL v. Jean-Marc Bosman, Royal club liégeois SA v. Jean-Marc Bosman and others and Union des associations européennes de football (UEFA) v. Jean-Marc Bosman, EU:C:1995:463.

[2] ‘The ECJ has collapsed the idea that there are purely sporting practices unaffected by EC law despite their economic effect, but it has not refused to accept that sport is special. Its message to governing bodies – explain how!’, S. Weatherill, European Sports Law (T.M.C. Asser Press, 2007), p. 353.


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Asser International Sports Law Blog | The Kristoffersen ruling: the EFTA Court targets athlete endorsement deals - By Sven Demeulemeester and Niels Verborgh

Asser International Sports Law Blog

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

The Kristoffersen ruling: the EFTA Court targets athlete endorsement deals - By Sven Demeulemeester and Niels Verborgh

Editor’s note: Sven Demeulemeester and Niels Verborgh are sports lawyers at the Belgium law firm, Altius.

 

Introduction

In its 16 November 2018 judgment, the Court of Justice of the European Free Trade Association States (the EFTA Court) delivered its eagerly awaited ruling in the case involving Henrik Kristoffersen and the Norwegian Ski Federation (NSF). 

On 17 October 2016, Kristoffersen had taken the NSF to the Oslo District Court over the latter’s refusal to let the renowned alpine skier enter into a sponsorship with Red Bull. At stake were the commercial markings on his helmet and headgear in races organised under the NSF’s umbrella. The NSF refused this sponsorship because it had already granted the advertising on helmet and headgear to its own main sponsor, Telenor. Kristoffersen claimed before the Oslo District Court, that the NSF should be ordered to permit him to enter into an individual marketing contract with Red Bull. In the alternative, Kristoffersen claimed damages up to a maximum of NOK 15 million. By a letter of 25 September 2017, the Oslo District Court referred several legal questions to the EFTA Court in view of shedding light on the compatibility of the rules that the NSF had invoked with EEA law.

If rules do not relate to the conduct of the sport itself, but concern sponsorship rights and hence an economic activity, these rules are subject to EEA law. The EFTA Court ruling is important in that it sets out the framework for dealing with - ever more frequent - cases in which an individual athlete’s endorsement deals conflict with the interest of the national or international sports governing bodies (SGBs) that he or she represents in international competitions.


The Kristoffersen ruling: the EFTA Court targets athlete endorsement deals 

A. Facts and procedures

Henrik Kristoffersen, silver medalist at the 2018 Pyeongchang Olympic Games and a bronze medalist at the 2014 Sochi Olympic Games, is a member of the Norwegian national alpine skiing team. Kristoffersen is not an employee of the Norwegian Ski Federation (NSF), but he did sign a standard athlete’s contract with the NSF to be able to participate in the national team.[1]

The Norwegian Ski Federation (NSF) - a non-profit organisation - is a sports organisation, which organises, among other things, activities in the discipline of alpine skiing. The NSF is a member of both the International Ski Federation (FIS) and of the Norwegian Olympic and Paralympic Committee and Confederation of Sports (NIF). Therefore, the NSF is subject to the FIS’ and the NIF’s regulations. Only the FIS and its national federations, such as the NSF, organise alpine skiing races of financial value to alpine skiers in classic disciplines, such as the slalom and downhill skiing. The NSF is financed by public funds and marketing contracts. The revenues gained from marketing activities accounted for 71% of the NSF’s total income in 2015.[2]

Individual sponsorship agreements are subject to the NSF’s approval,[3] although the NSF’s standard athlete contract foresees an exception[4] in which the athlete may enter into individual sponsorship agreements with equipment providers in the NSF’s “skipool”. The NSF skipool is a pool scheme that is open to selected equipment suppliers without requiring the NSF’s approval. To become a member of the NSF skipool, suppliers must be approved as an equipment supplier by the FIS/NSF. In addition, they also must pay an annual fee to the NSF. Athletes are prohibited from entering into agreements with any supplier that is not a member of the NSF skipool.

The NSF covers all expenses (e.g. board and lodging, transport, equipment, medical support, insurance, etc.) of the members of the Norwegian national alpine skiing team for approximately 200 days a year, but the athletes do not receive any of the funds that the NSF collects from the main and co-sponsors as the athletes’ own income.[5]

This specific case concerns a dispute between Kristoffersen and the NSF relating to an individual sponsorship contract that Kristoffersen had with Red Bull[6] for helmet and headgear worn in races under the auspices of the NSF and the International Ski Federation (FIS). Kristoffersen and Red Bull had been seeking to enter into such an agreement since 2014, but the NSF had refused permission for Kristoffersen to sign the contract at the end of April 2018.[7] The NSF had already decided to include space upon its helmet and headgear in the contract with its main sponsor, Telenor.

B. Questions to the EFTA Court and its answers

The questions

In this dispute, the Oslo District Court referred six questions to the EFTA Court, the supranational judicial body responsible for interpreting the Agreement on the European Economic Area (EEA) for the EFTA States that are parties to the EEA Agreement (Iceland, Liechtenstein and Norway).[8]

The questions essentially covered two issues.

The first issue was whether rules, such as those in the NSF Joint Regulations, on prior control and consent for individual sponsorship contracts regarding commercial marking on the national team’s equipment, or the application of those rules, constitute a restriction under Article 36 EEA Agreement or the Services Directive.[9]

The second issue was whether such a restriction on an athlete’s right to enter into sponsorship agreements could be justified.

Prior control and consent for individual sponsorship contracts can constitute a restriction

Applicability of Article 36 EEA Agreement

The EEA Agreement’s free movement rules may also apply to the rules laid down by sports associations.[10] With reference to the Court of Justice of the European Union’s long-standing case law,[11] the EFTA Court has concluded that sport is subject to EEA law to the extent it constitutes an economic activity. Athletes’ sponsorship contracts entail marketing services, which constitute, as such, an economic activity.[12] The EFTA Court has also concluded that the cross-border element is present since the proposed sponsorship contract involved a Norwegian athlete and an Austrian company; and the professional competitions in which Kristoffersen participated took place in several EEA States.[13]

Next, the court has determined whether the present case concerns the freedom of establishment or the freedom to provide services. The court has stated that “the rules in question concern, at least predominantly, the freedom to provide services, as opposed to the freedom of establishment” since the NSF’s rules may grant or refuse permission to athletes to enter into individual marketing contracts, which will have an impact on Kristoffersen’s opportunities to provide marketing services. By contrast, the rules will not or only remotely, affect an athlete’s freedom to establish themselves as professional skiers, which is the activity from which their marketing activity derives.[14]

The prohibition of restrictions on the freedom of providing services

Article 36 EEA Agreement prohibits restrictions on the freedom of providing services within the EEA. Measures liable to hinder or make less attractive the exercise of a fundamental freedom guaranteed by the EEA Agreements are an encroachment upon this freedom.

A system of prior control and consent for individual sponsorship contracts appears to make the exercise of Kristoffersen’s marketing activity less attractive. Under the EFTA Court’s settled case law, prior authorisation schemes amount to a restriction on the freedom to provide services.[15] However, this is ultimately for the referring court to determine.[16]

Justifications to restrictions

A restriction on the freedom to provide services (Article 36 EEA Agreement) may be justified on the grounds set out in Article 33 EEA Agreement[17] or by overriding reasons in the public interest, provided that it is appropriate to secure the attainment of the objective that it pursues and does not go beyond what is necessary to attain it.[18]

Legitimacy of the aims pursued by the measures at issue

Aims of a purely economic nature, such as the desire to increase profits, cannot justify a restriction on the freedom to provide services. The aim of the measure in this case appears, however, to be related to ensuring a stable basis for the NSF’s activities. The court has found it relevant that the NSF is a non-profit sports association, that the marketing revenues are by far its most important source of income (71% of the NSF’s total income in 2015) and that the overall revenue is not only used for professional sports, but also for recruitment, education and children’s and reactional sports.

The EFTA Court has indicated – with reference to the CJEU’s Bernard judgment[19] - that the objective of encouraging the recruitment and training of young athletes is legitimate. But, it is not sufficient for the restrictive measure to resort to a legitimate aim in general: it must be assessed whether the measure at issue actually pursues the invoked aim. The referring court must therefore identify, in the light of the facts of the case, the objectives that are in fact pursued by the contested measure.[20]

Suitability/Consistency

The party imposing the restriction must demonstrate that the measure is suitable to achieve the legitimate objective pursued along with genuinely reflecting a concern to attain that aim in a consistent and systematic manner.[21] The EFTA Court states that it is reasonable that some of the revenues are only dedicated to professional athletes, but that the income generated must also benefit the legitimate aims (such as recruitment, education, children’s and recreational sports).[22]

In this case, the EFTA Court has concluded that the rules on prior control and consent for individual sponsorship contracts, such as those laid down in the NSF Joint Regulations, are suitable to achieve that objective since a substantial part of the income is spent on the objective of encouraging the recruitment and training of young athletes.[23]

Necessity

The referring court must also assess whether the measure goes beyond what is necessary to attain that objective. The necessity test implies that the chosen measure must not be capable of being replaced by an alternative measure that is equally useful but less restrictive to the fundamental freedoms of EEA law.[24] In this case, it must be assessed whether there are other less restrictive measures that would ensure a similar level of resources.[25]

The Court believes that the assessment of the system’s necessity must take account of the fact that the NSF and the athletes are mutually dependent on one another.[26] The system must ensure that the athletes receive a fair share of the revenues from sponsorship contracts. If not, that would constitute a disproportionate restriction on the athletes’ freedom to provide sponsorship services. The Court has argued that in this case it appears that revenue generated from marketing contracts constitutes the most important source of income for both the NSF and the athletes.[27] In addition to that, the Court has also taken into account that the NSF covers all the expenses of members of the Norwegian national alpine skiing team for approximately 200 days a year. Furthermore, the athletes may enter into individual sponsorship contracts with equipment providers in the NSF skipool without the NSF’s approval. Outside the NSF skipool, additional contracts may be entered into with the NSF’s approval.[28]

Kristoffersen concluded several of those contracts, which may have an impact on the assessment of the referring court about whether the athletes receive - through the system in place - a fair share of the revenue from the potential market for sponsorship contracts.[29]

C. Guidelines for concrete decisions and procedural aspects

A system of prior control and consent for individual sponsorship contracts may constitute a justified restriction on athletes’ freedom to provide sponsorship services, so long as it pursues a legitimate aim, is suitable and does not go beyond what is necessary to attain the aim.[30]

While a system of prior control and consent for individual sponsorship contracts may be justified as such, it does not necessarily follow that every individual decision taken under that system is equally justified. Such individual decisions must pursue the legitimate aims of the system in a suitable and proportionate manner and there must be a fair balance between the interests of the NSF and the professional athletes.[31]

The existence, at the time of the athlete’s application for approval, of a collective sponsorship contract with the NSF’s main sponsor, Telenor, covering helmet and headgear, may be relevant to the assessment of whether the concrete refusal is justified. The assessment of proportionality may also include the issue of whether the NSF was aware of Kristoffersen’s intention to enter into a separate sponsorship agreement when NSF concluded its collective sponsorship contract, as well as the impact of such a collective sponsorship agreement on Kristoffersen’s ability to generate income from his profession. Furthermore, the referring court may also take account of the impact of individual sponsorship contracts on the NSF’s ability to achieve the legitimate aims invoked.

Besides that, the system and the decisions under a national sports federation’s approval scheme for individual marketing contracts may not be arbitrary and must satisfy certain procedural requirements (such as: the proper communication of an individual decision within a reasonable time; and a review of the decision before an independent body should be available).[32]

Striking the right balance between collective interests and individual ones can be difficult as the EFTA Court’s decision illustrates. Even though the EFTA Court sets out some key principles for evaluating advertising and sponsorship restrictions, it leaves the ultimate call for balancing those interests to the Oslo District Court.


Conclusion

The EFTA Court has drawn a clear ‘line in the sand’ for SGBs.

The Court’s ruling considers that a system of prior control and consent for athlete’s individual sponsorships, and potential refusal of such sponsorship, constitutes a restriction of the freedom to provide services, to the extent that the system makes less attractive the exercise of an athlete’s freedom to provide a marketing service. Such a restriction will be acceptable only if it pursues a legitimate aim, is suitable and does not go beyond what is necessary to attain the aim.

Aims of a purely economic nature, such as the desire to increase profits, cannot justify such a restriction. The objective of encouraging the recruitment and training of young athletes can however be a legitimate aim, to the extent that a substantial part of the income is indeed spent on encouraging the recruitment and training of young athletes. Also, a fair balance between the federation’s interests and the particular athlete’s interests is required. The EFTA Court considers that SGBs and athletes are often mutually dependent on one another. Athletes must receive a fair share of the revenues from sponsorship contracts. A decision to refuse an endorsement must be well-reasoned and communicated to the athlete within a reasonable timeframe. In addition, a review procedure before a body independent of the federation should be available.

In times where SGBs’ advertising and sponsorship restrictions are already under scrutiny from a competition law perspective,[33] the EFTA Court has added internal market arguments to the mix. Both the fundamental freedoms and the competition law arguments are likely to bolster individual athletes seeking to increase revenue from their sporting activities. The decision clearly indicates that SGBs should be careful when dealing with sponsorship deals.

At the same time, the ruling shows SGBs how to adopt sponsorship regulations that are the least likely to infringe EEA law. To justify restrictions, the SGBs will need to come up with a transparent, intelligent system in which restrictions are justified in view of (proven) redistribution of income to support the training of athletes and the funding of amateur sports. The presence of independent review procedures will be key. In that respect, the EFTA Court ruling may serve as ‘ammunition’ for those looking to increase transparency and good governance in the seat of SGBs.


[1] EFTA Court 16 November 2018, Case E-8/17, Kristoffersen/NSF, par. 8.

[2] EFTA Court 16 November 2018, Case E-8/17, Kristoffersen/NSF, par. 9-10.

[3] It follows from art. 200.3 and 204.1 of the FIS International Ski Competition Rules (joint regulations for alpine skiing), section 13-3(3) and chapter 14 of the Norwegian Olympic Committee’s Statutes, and Point 206.2.5 of the NSF Joint Regulations.

[4] EFTA Court 16 November 2018, Case E-8/17, Kristoffersen/NSF, par. 17.

[5] EFTA Court 16 November 2018, Case E-8/17, Kristoffersen/NSF, par. 19.

[6] Red Bull GmbH has its headquarters in Austria.

[7] EFTA Court 16 November 2018, Case E-8/17, Kristoffersen/NSF, par. 20.

[8] Article 34 of the “Agreement between the EFTA States on the Establishment of a Surveillance Authority and a Court of Justice” foresees in the possibility for courts or tribunals in an EFTA State (Norway, Iceland and Liechtenstein) to request the EFTA Court to give an advisory opinion on the interpretation of the EEA Agreement.

[9] Directive 2006/123/EC of the European Parliament and of the Council of 12 December 2006 on service in the internal market.

[10] EFTA Court 16 November 2018, Case E-8/17, Kristoffersen/NSF, par. 68.

[11] See among others: CJEU 12 December 1974, n° 36-74, ECLI:EU:C:1974:140; Walrave and Koch/Union Cycliste International, par. 4; CJEU 14 July 1976, nr. 13/76, ECLI:EU:C:1976:115, Donà/Mantero, par. 12; CJEU 15 December 1995, n° C415/93, ECLI:EU:C:1995:463, ‘Bosman’, par. 73; CJEU 18 July 2006, n° C-519/04 P, ECLI:EU:T:2004:282, Meca-Medina and Majcen/Commissie, par. 37-44.

[12] EFTA Court 16 November 2018, Case E-8/17, Kristoffersen/NSF, par. 66.

[13] EFTA Court 16 November 2018, Case E-8/17, Kristoffersen/NSF, par. 67.

[14] EFTA Court 16 November 2018, Case E-8/17, Kristoffersen/NSF, par. 69.

[15] EFTA Court 10 May 2016, Case E-19/15, ESA/Liechtenstein, par. 85.

[16] EFTA Court 16 November 2018, Case E-8/17, Kristoffersen/NSF, par. 76.

[17] Article 33 EEA Agreement “The provisions of this Chapter and measures taken in pursuance thereof shall not prejudice the applicability of provisions laid down by law, regulation or administrative action providing for special treatment for foreign nationals on grounds of public policy, public security or public health.”

[18] EFTA Court 16 November 2018, Case E-8/17, Kristoffersen/NSF, par. 114.

[19] CJEU 16 March 2010, n° C-325/08, ECLI:EU:C:2010:143, Olympique Lyonnais

SASP/Olivier Bernard and Newcastle UFC, par. 23.

[20] EFTA Court 16 November 2018, Case E-8/17, Kristoffersen/NSF, par. 117.

[21] EFTA Court 16 November 2018, Case E-8/17, Kristoffersen/NSF, par. 118.

[22] EFTA Court 16 November 2018, Case E-8/17, Kristoffersen/NSF, par. 119.

[23] EFTA Court 16 November 2018, Case E-8/17, Kristoffersen/NSF, par. 120.

[24] EFTA Court, 16 May 2017, Case E-8/16 Netfonds Holding ASA, Netfonds Bank AS and Netfonds Livsforsikring AS/the Norwegian Government.

[25] EFTA Court 16 November 2018, Case E-8/17, Kristoffersen/NSF, par. 122.

[26] EFTA Court 16 November 2018, Case E-8/17, Kristoffersen/NSF, par. 124.

[27] EFTA Court 16 November 2018, Case E-8/17, Kristoffersen/NSF, par. 124.

[28] EFTA Court 16 November 2018, Case E-8/17, Kristoffersen/NSF, par. 125.

[29] EFTA Court 16 November 2018, Case E-8/17, Kristoffersen/NSF, par. 125.

[30] EFTA Court 16 November 2018, Case E-8/17, Kristoffersen/NSF, par. 125.

[31] EFTA Court 16 November 2018, Case E-8/17, Kristoffersen/NSF, par. 127-128.

[32] EFTA Court 16 November 2018, Case E-8/17, Kristoffersen/NSF, par. 129-133.

[33] Cf. https://www.bundeskartellamt.de/SharedDocs/Meldung/EN/Pressemitteilungen/2017/21_12_2017_DOSB_IOC.html.

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