'Can't fight corruption with con tricks
They use the law to commit crime
And I dread, dread to think what the future
will bring
When we're living in gangster time'
The Specials - Gangsters
The pressing need for change
The
Parliamentary Assembly (PACE) of the Council of Europe (CoE), which is composed
of 318 MPs chosen from the national parliaments of the 47 CoE member states,
unanimously adopted a report entitled ‘the reform of
football’
on January 27, 2015. A draft resolution on the report will be debated during the
PACE April 2015 session and, interestingly, (only?) FIFA’s president Sepp
Blatter has been sent an invitation.
The PACE report
highlights the pressing need of reforming the governance
of football by FIFA and UEFA respectively. Accordingly, the report contains
some interesting recommendations to improve FIFA’s (e.g., Qatargate[1]) and
UEFA’s governance (e.g., gender representation). Unfortunately, it remains unclear
how the report’s recommendations will actually be implemented and enforced.
The report is a
welcomed secondary effect of the recent Qatargate directly involving former
FIFA officials such as Jack Warner, Chuck Blazer, and Mohamed Bin Hammam[2] and
highlighting the dramatic failures of FIFA’s governance in putting its house in
order. Thus, it is undeniably time to correct the governance of football by FIFA
and its confederate member UEFA – nolens
volens. The real question is how to do it.
Photograph:
Fabrice Coffrini/AFP/Getty Images Photograph:
Octav Ganea/AP
The main recommendations of the report
In order to successfully
investigate and disciplinary sanction violations made by its members, the
report calls on FIFA and UEFA to revamp their institutions. Issues like
corruption, nepotism, cronyism, conflict of interests can only be solved if:
- The rules and decisions are clear, transparent and accountable (i.e. sanctioned) at a central level (Congress)
The flow of money is clear, transparent and accountable (i.e. sanctioned) at a central level (Congress)
Those who are in charge could be held accountable in a judicial or democratic, transparent and clear way before Congress
- The duration of the terms of office should be limited at all levels (President, Congress, Committees)
The rules and decisions made by independent FIFA/UEFA officials should be made ‘for the good of the game’ and not for personal gains
Possible conflicts of interests should be prevented
Gender equality with regard to democratic representation (Congress, Committees).
The report’s lack of clarity on the role of
Switzerland
In order to
implement the report’s recommendations, it is necessary to fully appreciate the
essential role Switzerland could play because, inter alia, FIFA and UEFA are
both associations under Swiss law.
While taking into account the upcoming implementation of Lex FIFA i.e. the
criminalisation of corruption in sport in Switzerland, one needs also to
analyse the potential role of Swiss private law to ensure a comprehensive implementation
of the report’s recommendations on reforming the governance of football by FIFA
and UEFA.
Good governance, corporate governance or association
governance?
‘Good
governance’ should be distinguished from ‘corporate governance’. The main and
essential difference between the two is that the former concerns the protection
of the public interest and the latter the protection of the corporation
concerned. Accordingly, the set of duties, responsibilities and competences of,
e.g., public law authorities are different from those who serve in a commercial
enterprise. Considering the public and private law context and the different
demands with regard to using the available instruments thereof, it is important
to discern the differences between good governance and corporate governance.[3]
According to
the European Commission ‘[c]orporate governance defines relationships between a
company’s management, its board … and its … stakeholders[4].
It determines the way companies are managed and controlled’[5] by
those stakeholders for the former’s and
the latter’s interest.
In principle,
corporate governance is mainly the (social) responsibility of the respective
corporation[6]
whereby those stakeholders play a crucial role to ensure that certain standards[7]
such as transparency and accountability – with regard to, e.g., FIFA’s and
UEFA’s economic and rule-making activities – would be respected in accordance
with mandatory rules of national and EU law[8].
All international sports governing bodies located in Switzerland such as
FIFA and UEFA have been
recognized as private law associations under Article 60 et seq. of the Swiss Civil Code (CC). Since
1981, Switzerland has also recognized the public law status of the
International Olympic Committee (IOC).[9]
Under Swiss
law, an association could be a profit-organization that may make turnovers or
profits comparable to commercial enterprises.[10] Essentially,
however, a corporation differs from an association, namely the former has to be
financially accountable to its shareholders whereas the latter is required to be
democratically and financially accountable to its members.[11]
In order to ensure that those members make use of their membership rights, it
is fundamental that the decision-making process with regard to anti-corruption
compliance structures and democratic structures are strictly adhered in
accordance with mandatory rules of law. Accordingly, it may also be a starting
point for associations to act in accordance with the principles of ‘association
governance’ if they were – indeed – implemented in mandatory law and applied
correctly.[12]
Constraints to association governance
As one of the state parties to the European Convention on
Human Rights (ECHR), Switzerland is inter alia bound by Article 11 of the
ECHR i.e. the fundamental right to freedom of (assembly and) association, which
is subject to restrictions that are in accordance with the law and necessary in
a democratic society. Accordingly, those associations have a restricted competence[13]
to set the rules, to apply and to enforce them uniformly to their members.[14]
According to
Article 23 Federal Constitution (FC), a private law association with a non-economic
objective (i.e. political, religious, scientific, cultural, social or
non-profit) has the right of freedom of association i.e. the right to establish
or dissolve, to voluntarily be (come) a member or to leave and to participate
in the association’s activities, which is not subject to state approval or
state supervision. [15]
As profit associations are only protected by the right of economic freedom
pursuant to Article 27 FC, it is of vital importance for non-profit associations
not to aim for monetary or financial benefits for its members.[16]
FIFA’s intent
to exist as a non-profit organization is apparent from their articles of
association.[17]
According to Article 2(a) FIFA statutes, its main objective is: ‘[…] to improve
the game of football constantly and promote it globally in the light of its
unifying, educational, cultural and humanitarian values, particularly through
youth and development programmes’. UEFA has a corresponding objective pursuant
to Article 2 UEFA statutes. As long as the surplus of revenues will be spent on
its non-commercial objectives under those articles of association, the
non-profit status of FIFA – and, mutatis
mutandis, UEFA – would not be challenged by Switzerland[18]. However,
as a legislator, a judicator and as a state party to the CoE, Switzerland should
critically assess those associations’ non-profit objectives and the significant
surplus from their economic activities plus the distributions thereof in view
of the report’s recommendations on financial
transparency and accountability in order to respect the – underlying – association
governance principles.[19]
FIFA and UEFA[20]
are both established and registered[21]
as private law associations under Article 60 et seq. CC[22] and,
moreover, bound to respect the Swiss mandatory rules of law under Article 63(2)
CC. Thus, mandatory rules cannot be disregarded by the articles of association
i.e the self-regulatory framework of FIFA and UEFA. If an association’s
resolution were to breach mandatory rules, it would be either voidable (i.e. to
be challenged within a month of the notification) or null and void (i.e. to be raised
at any time) under Article 75 CC.[23]
In case the
articles of association do not address a particular issue, the non-mandatory
rules of law would apply.[24]
In particular, it should be noted that Articles 64-69b CC mostly[25] refer
to mandatory procedural rules with regard to the articles of association. For
instance, an association is required to have two organs, namely the general
meeting of members that has supremacy over all other organs (Article 64(1) CC)
and a committee consisting of members – and non-members if not explicitly
forbidden by the articles of association[26] –
that are elected by the supreme governing body (Article 69 CC). Other organs
may be established pursuant to the articles of association.[27]
In other words,
it is up to the, e.g., FIFA articles of association to self-regulate the
composition, the independence of the Ethics Committee’s members and the
transparency of its work. It is therefore not clear how this particular recommendation
(please consider p. 8 of the report) can actually be implemented and enforced
by the Swiss authorities. A similar assessment could be made, mutatis mutandis, with regard to all the
other recommendations of the report.
Civil liability
Apart from the
aforesaid memberships’ rights deriving from the decision-making process with
regard to anti-corruption compliance structures and democratic structures,
associations could also be held liable by their members because a membership is
a contractual agreement between two private parties. In other words, the extra-legal
part of association governance may be corrected by the rules of civil liability
(including tort).
In accordance
with Article 1 in conjunction with Article 155(f) of the Private International
Law Act (PILA), Articles 52-59 (‘legal entities’) and Articles 60-79
(‘associations’) CC are applicable to all
members of both associations.[28] If
a private person or legal entity decides to be(come) a member of a private law
association, the respective articles of association, regulations or decisions
are contractually binding. Apart from membership contracts, there are – of
course – other forms of private law’ relationships available whereby one may contractually
be bound (in[29])directly
to the FIFA or UEFA rules or decisions like, e.g., labour contracts, commercial
contracts, player’ licences or host city agreements (e.g., Qatargate).
In this regard,
the mandatory rules of civil law include, in particular public policy, bona mores and the protection of
personality rights.[30]
Given that the public policy restrictions have already
been assessed in an earlier blog post[31],
this blog will specifically focus on bona
mores and the protection of personality rights.
As regards to bona
mores, the Swiss Federal Supreme Court ruled that in case an article of
association contains a third party’s veto right regarding all decisions of the
association’s general assembly, it would be null and void for violating bona mores and the right of autonomy of
associations.[32]
In reference to
the Swiss notion of personality rights
(e.g., the right to professional fulfilment through sporting activities, or the
right to economic freedom[33])[34],
which must be regarded as the equivalent of human rights horizontally applied
to private law’ relationships, Article 27 CC stipulates that ‘[n]o person can
wholly or partially renounce its capacity to have rights and to effect legal
transactions’.[35]
Accordingly, if it cannot be established that the law, the athlete’s consent or
the existence of an overriding public/private interest may justify an
infringement to, e.g., an athlete’s right to economic freedom (i.e. restraint
of trade), it must be regarded as null and void under Article 28 CC.[36]
Hence, as legislator and as State party to the CoE, Switzerland should have the
duty to critically assess whether FIFA or UEFA may infringe their members’ contractual
rights as protected by mandatory rules of law, in particular public policy and the
protection of personality rights (i.e. contractual freedoms) in the light of the
report’s recommendations on financial and
on democratic transparency in order to respect the – underlying – association
governance principles.
Criminal liability
As regards the impact
of mandatory rules of criminal law on international sports
federations based in Switzerland, the first package
of Lex FIFA - that will enter into force in the first half of 2015 if
uncontested (i.e. a referendum[37])
- defines their respective ‘presidents’ as ‘politically-exposed persons’
(PEPs) i.e. persons with a prominent public function[38].
As PEPs are in a position to potentially commit financial offences (money
laundering or corruption), banks are required to closely monitor those accounts
(and of their families!) for any suspicious financial transaction. If PEPs and/or
their families were to receive cash payments greater than CHF100,000, the
respective bank would be obliged to identify them, to keep a record of the
transactions and to clarify the background thereof. In case there is any
evidence of criminal activities, the bank must report the unusual transactions
to the Swiss authorities.[39]
However, and surprisingly, the first package of Lex FIFA does not cover UEFA because ‘it is technically a[n]
European organisation’ according to the approved legislative proposal[40]
and as interpreted by its initiator Roland Büchel MP.
As part of the future second package of Lex FIFA, Switzerland will implement legislation to make corruption
in sport a criminal offence. Insofar, private bribery (i.e. passive/active
bribery in the private sector) is only regarded as a criminal offence under
Article 4a and Article 23 of the Swiss Federal Unfair Competition Law following
a complaint.[41]
Conclusions
The lofty goals
of the Council of Europe’s report on reforming football’s governance are
laudable in principle, however they lack a clear reflection on the legal means
available to attain them. To this end, it is the main point of this blog post’s
author to attract the attention of the reader on the particular responsibility
of Switzerland in this regard. Due to FIFA and UEFA being legally seated in
Switzerland, Swiss law is tasked with the tough mission, in light of recent
events, to enforce via private law and
criminal law association governance standards on both non-profit organizations.
The future implementation of Lex FIFA
with regard to the criminalisation of corruption in sport, is a first step in
the right direction. What’s rather missing, however, is a private law
perspective. A comprehensive implementation of the report’s recommendations can
only be achieved if the interpretation of the relevant provisions of the Swiss
Code were to be in line with the report’s recommendations. Indeed, as a
prominent Council of Europe’ state party, Switzerland should be stricter when
assessing the (un)justifiability of a possible infringement by FIFA or UEFA of a
member’s rights under the Swiss notion of mandatory rules of law. In this
regard, it should also take into consideration the PACE report’s
recommendations on reforming the governance of football by FIFA and UEFA.
[1] E.g. Qatargate: la confession
accablante, France Football No. 3582, 9 December 2014, p. 19 et seq.
[2] Connarty, The
reform of football governance, PACE report, 27 January 2015, p. 17.
[3] Addink, Goed bestuur, Kluwer 2010, p. 6.
[4] ‘See OECD
Principles of Corporate Governance, 2004, p. 11, accessible at
http://www.oecd.org/dataoecd/32/18/31557724.pdf. ‘The EU corporate
governance framework includes legislation in areas such as corporate governance
statements, transparency of listed companies, shareholders’ rights and takeover
bids as well as ‘soft law’, namely recommendations on the role and on the
remuneration of companies’ directors.’
[5] COM 2012(740)
final, Action Plan: European company law and corporate governance - a modern
legal framework for more engaged shareholders and sustainable companies, p.
2-3.
[6] E.g., Giesen, Alternatieve regelgeving and
privaatrecht, Monografieën Privaatrecht, Kluwer 2007, p. 29.
[7] COM 2012(740)
final, Action Plan: European company law and corporate governance - a modern
legal framework for more engaged shareholders and sustainable companies, p. 3.
[8] COM 2012(740)
final, Action Plan: European company law and corporate governance - a modern
legal framework for more engaged shareholders and sustainable companies, p. 3.
[9] Valloni &
Pachmann, Sports law in Switzerland, Wolters Kluwer 2011, p. 65.
[10] Handschin, Good
governance: lessons for sports organizations?, in: Bernasconi, International
sports law and jurisprudence of the CAS, 2014, p. 118. Notes ommitted.
[11] Handschin, Good
governance: lessons for sports organizations?, in: Bernasconi, International
sports law and jurisprudence of the CAS, 2014, p. 118. Notes ommitted.
[12] Handschin, Good
governance: lessons for sports organizations?, in: Bernasconi, International
sports law and jurisprudence of the CAS, 2014, p. 119. Notes ommitted.
[13] Please do take into
account Weatherill’s statement on conditional autonomy of sports federations
under EU law: Weatherill, Is the Pyramid Compatible with EC Law?, ISLJ
2005(3–4), p. 3–7, republished in: Weatherill, European Sports Law Collected Papers Second
Edition 2014, available at: http://www.springer.com/law/international/book/978-90-6704-938-2.
[14] Valloni &
Pachmann, Sports law in Switzerland, Wolters Kluwer 2011, p. 40-44.
[15] Jakob, Huber and
Rauber, Nonprofit law in Switzerland, The Johns Hopkins comparative nonprofit
sector project, Working Paper No. 47, March 2009, p. 3, 5.
[16] Jakob, Huber and
Rauber, Nonprofit law in Switzerland, The Johns Hopkins comparative nonprofit sector
project, Working Paper No. 47, March 2009, p. 5.
[17] Pieth, Governing
FIFA – concept paper and report, 19 September 2011, p. 12. Tomlinson, FIFA
(Fédération Internationale de Football Association) : the men, the myths and
the money, 2014, p. 28.
[18] Pieth, Governing
FIFA – concept paper and report, 19 September 2011, p. 12.
[19] By the way, the EU-28 member
states are obliged to act in accordance with the Court of Justice rulings in, inter alia, Walrave (Case 36-74, ECR 1974
1405), Bosman (Case C-415/93, ECR
1995 I-4921) and
Meca Medina (Case C-519/04 P, ECR 2006 I-6991) with regard to the economic and rule-making
activities of UEFA and FIFA. For more information please see Weatherill, European Sports Law
Collected Papers Second Edition 2014, available at: http://www.springer.com/law/international/book/978-90-6704-938-2.
[20] Valloni &
Pachmann, Sports law in Switzerland, Wolters Kluwer 2011, p. 67-69.
[21] Article 1 FIFA
statutes; Article 1 UEFA statutes.
[22] Valloni &
Pachmann, Sports law in Switzerland, Wolters Kluwer 2011, p. 19, 40.
[23] Handschin, Good
governance: lessons for sports organizations?, in: Bernasconi, International
sports law and jurisprudence of the CAS, 2014, p. 126-127. Notes ommitted.
[24] Jakob, Huber and
Rauber, Nonprofit law in Switzerland, The Johns Hopkins comparative nonprofit
sector project, Working Paper No. 47, March 2009, p. 6.
[25] With the notable exception
of Article 75 CC.
[26] BGE 73 II 1.
[27] Jakob, Huber and
Rauber, Nonprofit law in Switzerland, The Johns Hopkins comparative nonprofit
sector project, Working Paper No. 47, March 2009, p. 6.
[28] Valloni &
Pachmann, Sports law in Switzerland, Wolters Kluwer 2011, p. 19.
[29] E.g., a dynamic
reference to accept the jurisdiction of the Court of Arbitration for Sports
(CAS).
[30] Morgan, The
relevance of Swiss law in doping disputes, in particular from the perspective
of personality rights – a view from abroad, in: Revue de droit suisse, Band 132
(2013) I Heft 3, p. 344-345. Fenners, Der ausschluss der staatlichen gerichtsbarkeit
in organisierten sport, Zurich 2006, paras. 111-113. Baddeley, L’Association
sportive face au droit – Les limites de son autonomie, Basel 1994, p. 108.
[31] Marco van der
Harst, Can (national or EU) public policy stop CAS awards?, 22 July 2014,
available at: http://www.asser.nl/SportsLaw/Blog/post/can-national-or-eu-public-policy-stop-cas-awards-by-marco-van-der-harst-ll-m-phd-candidate-and-researcher-at-the-aislc.
[32] BGE 97 II 108 et
seq. Valloni & Pachmann, Sports law in Switzerland, Wolters Kluwer 2011, p.
41.
[33] Let’s not forget
that there are two sports law cases pending versus Switzerland at the European
Court of Human Rights: Adrian Mutu (No. 40575/10) and Claudia Pechstein (No.
67474/10).
[34] Morgan, The
relevance of Swiss law in doping disputes, in particualr from the perspective
of personality rights – a view from abroad, in: Revue de droit suisse, Band 132
(2013) I Heft 3, p. 344, note 6: Decision 4A_558/2011 of 27 March 2012; ATF 134
III 193 (Further notes omitted).
[35] E.g., Morgan, The
relevance of Swiss law in doping disputes, in particualr from the perspective
of personality rights – a view from abroad, in: Revue de droit suisse, Band 132
(2013) I Heft 3, p. 344-345.
[36] E.g., Morgan, The
relevance of Swiss law in doping disputes, in particualr from the perspective
of personality rights – a view from abroad, in: Revue de droit suisse, Band 132
(2013) I Heft 3, p. 344-345.
[37] Deadline: April 2,
2015. Source: http://www.admin.ch/opc/de/federal-gazette/2014/9689.pdf.
[38] In order to prevent being blacklisted by the Organisation for Economic
Cooperation and Development (OECD), Switzerland had to implement the 2012
Recommendations of the Financial Action Task Force (FATF) with regard to
combating money laundering and terrorist financing.
[39] Sources: http://www.sportsintegrityinitiative.com/swiss-law-requires-bank-account-monitoring-sports-federation-heads/ and http://www.rolandbuechel.ch/news_850_lex-fifa-interessiert-auch-die-russen-buechel-auf-den-russischen-sputnik-news.xhtml.
[40] Bundesgesetz zur Umsetzung der
2012 revidierten Empfehlungen der Groupe d’action financière, December 12, 2014,
p. 9697-9698. Available at: http://www.admin.ch/opc/de/federal-gazette/2014/9689.pdf.
[41] Cassini, Corporate
responsibility and compliance programs in Switzerland, in: Manacorda, Centonze
and Forti (eds.), Preventing corporate corruption: the anti-bribery compliance
model, Springer 2014, p. 493.