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

State aid in Croatia and the Dinamo Zagreb case

Introduction

The year 2015 promises to be crucial, and possibly revolutionary, for State aid in football. The European Commission is taking its time in concluding its formal investigations into alleged State aid granted to five Dutch clubs and several Spanish clubs, including Valencia CF and Real Madrid, but the final decisions are due for 2015.

A few months ago, the Commission also received a set of fresh State aid complaints originating from the EU’s newest Member State Croatia. The complaints were launched by a group of minority shareholders of the Croatian football club Hajduk Split, who call themselves Naš Hajduk. According to Naš Hajduk, Hajduk Split’s eternal rival, GNK Dinamo Zagreb, has received more than 30 million Euros in unlawful aid by the city of Zagreb since 2006.More...

“The Odds of Match Fixing – Facts & Figures on the integrity risk of certain sports bets”. By Ben Van Rompuy

Media reports and interested stakeholders often suggest that certain types of sports bets would significantly increase the risks of match fixing occurring. These concerns also surface in policy discussions at both the national and European level. Frequently calls are made to prohibit the supply of “risky” sports bets as a means to preserve the integrity of sports competitions.

Questions about the appropriateness of imposing such limitations on the regulated sports betting, however, still linger. The lack of access to systematic empirical evidence on betting-related match fixing has so far limited the capacity of academic research to make a proper risk assessment of certain types of sports bets. 

The ASSER International Sports Law Centre has conducted the first-ever study that assesses the integrity risks of certain sports bets on the basis of quantitative empirical evidence. 

We uniquely obtained access to key statistics from Sportradar’s Fraud Detection System (FDS). A five-year dataset of football matches worldwide, which the FDS identified as likely to have been targeted by match fixers, enabled us to observe patterns and correlations with certain types of sports bets. In addition, representative samples of football bets placed with sports betting operator Betfair were collected and analysed. 

The results presented in this report, which challenge several claims about the alleged risks generated by certain types of sports bets, hope to inform policy makers about the cost-effectiveness of imposing limits on the regulated sports betting offer.More...

The Pechstein ruling of the Oberlandesgericht München - Time for a new reform of CAS?

Editor's note (13 July 2015): We (Ben Van Rompuy and I) have just published on SSRN an article on the Pechstein ruling of the OLG. It is available at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2621983. Feel free to download it and to share any feedback with us!


On 15 January 2015, the earth must have been shaking under the offices of the Court of Arbitration for Sport (CAS) in Lausanne when the Oberlandesgericht München announced its decision in the Pechstein case. If not entirely unpredictable, the decision went very far (further than the first instance) in eroding the legal foundations on which sports arbitration rests. It is improbable (though not impossible) that the highest German civil court, the Bundesgerichtshof (BGH), which will most likely be called to pronounce itself in the matter, will entirely dismiss the reasoning of the Oberlandesgericht. This blogpost is a first examination of the legal arguments used (Disclaimer: it is based only on the official press release, the full text of the ruling will be published in the coming months).More...



In blood we trust? The Kreuziger Biological Passport Case. By Thalia Diathesopoulou

Over the last twenty years, professional cycling has developed the reputation of one of the “most drug soaked sports in the world”.[1] This should not come as a surprise. The sport’s integrity has plummeted down due to an unprecedented succession of doping scandals. La crème de la crème of professional cyclists has been involved in doping incidents including Tyler Hamilton, Floyd Landis, Alejandro Valverde and Lance Armstrong. The once prestigious Tour de France has been stigmatized as a race of “pharmacological feat, not a physical one”.[2]

In view of these overwhelming shadows, in 2008, the International Cycling Union (UCI), in cooperation with the World Anti-Doping Agency (WADA) took a leap in the fight against doping. It became the first International Sports Federation to implement a radical new anti-doping program known as the Athlete Biological Passport (ABP).[3] More...

A Question of (dis)Proportion: The CAS Award in the Luis Suarez Biting Saga

The summer saga surrounding Luis Suarez’s vampire instincts is long forgotten, even though it might still play a role in his surprisingly muted football debut in FC Barcelona’s magic triangle. However, the full text of the CAS award in the Suarez case has recently be made available on CAS’s website and we want to grasp this opportunity to offer a close reading of its holdings. In this regard, one has to keep in mind that “the object of the appeal is not to request the complete annulment of the sanction imposed on the Player” (par.33). Instead, Suarez and Barcelona were seeking to reduce the sanction imposed by FIFA. In their eyes, the four-month ban handed out by FIFA extending to all football-related activities and to the access to football stadiums was excessive and disproportionate. Accordingly, the case offered a great opportunity for CAS to discuss and analyse the proportionality of disciplinary sanctions based on the FIFA Disciplinary Code (FIFA DC).  More...

The International Sports Law Digest – Issue II – July-December 2014

I. Literature


1. Antitrust/Competition Law and Sport

G Basnier, ‘Sports and competition law: the case of the salary cap in New Zealand rugby union’, (2014) 14 The International Sports Law Journal 3-4, p.155

R Craven, ‘Football and State aid: too important to fail?’ (2014) 14 The International Sports Law Journal 3-4, p.205

R Craven, ‘State Aid and Sports Stadiums: EU Sports Policy or Deference to Professional Football (2014) 35 European Competition Law Review Issue 9, 453


2. Intellectual Property Rights in Sports law / Betting rights/ Spectators’ rights/ Sponsorship Agreements

Books

W T Champion and K DWillis, Intellectual property law in the sports and entertainment industries (Santa Barbara, California; Denver, Colorado; Oxford, England: Praeger 2014)

J-M Marmayou and F Rizzo, Les contrats de sponsoring sportif (Lextenso éditions 2014) 

More...






Time to Cure FIFA’s Chronic Bad Governance Disease

 After Tuesday’s dismissal of Michael Garcia’s complaint against the now infamous Eckert statement synthetizing (misleadingly in his eyes) his Report on the bidding process for the World Cup 2018 and 2022, Garcia finally decided to resign from his position as FIFA Ethics Committee member. On his way out, he noted: “No independent governance committee, investigator, or arbitration panel can change the culture of an organization”. It took Garcia a while to understand this, although others faced similar disappointments before. One needs only to remember the forgotten reform proposals of the Independent Governance Committee led by Prof. Dr. Mark Pieth. More...

The CAS Ad Hoc Division in 2014: Business As Usual? - Part. 2: The Selection Drama

In a first blog last month we discussed the problem of the scope of jurisdiction of the Ad Hoc Division of the Court of Arbitration for Sport. The key issue was whether an athlete could get his case heard in front of the CAS Ad Hoc Division or not. In this second part, we will also focus on whether an athlete can access a forum, but a different kind of forum: the Olympic Games as such. This is a dramatic moment in an athlete’s life, one that will decide the future path of an entire career and most likely a lifetime of opportunities. Thus, it is a decision that should not be taken lightly, nor in disregard of the athletes’ due process rights. In the past, several (non-)selection cases were referred to the Ad Hoc Divisions at the Olympic Games, and this was again the case in 2014, providing us with the opportunity for the present review.

Three out of four cases dealt with by the CAS Ad Hoc Division in Sochi involved an athlete contesting her eviction from the Games. Each case is specific in its factual and legal assessment and deserves an individual review. More...

Should the CAS ‘let Dutee run’? Gender policies in Sport under legal scrutiny. By Thalia Diathesopoulou

The rise of Dutee Chand, India’s 100 and 200-meter champion in the under 18-category, was astonishing. Her achievements were more than promising: after only two years, she broke the 100m and 200m national junior records, competed in the 100m final at the World Youth Athletics Championships in Donetsk and collected two gold medals in the Asian Junior Championships in Chinese Taipei. But, in July 2014, this steady rise was abruptly halted. Following a request from the Athletics Federation of India (AFI), the Sports Authority of India (SAI) conducted blood tests on the Indian sprinters. Dutee was detected with female hyperandrogenism, i.e a condition where the female body produces high levels of testosterone. As a result, a few days before the Commonwealth Games in Glasgow, the AFI declared Dutee ineligible to compete under the IAAF Regulations and prevented her from competing in future national and international events in the female category. Pursuant to the IAAF ‘Hyperandrogenism Policy’, the AFI would allow Dutee to return to competition only if she lowers her testosterone level beneath the male range by means of medical or surgical treatment.[1] On 25 September 2014, Dutee filed an appeal before the CAS, seeking to overturn the AFI’s decision and declare IAAF and IOC’s hyperandrogenism regulations null and void. She is defending her right to compete the way she actually is: a woman with high levels of testosterone. Interestingly enough, albeit a respondent, AFI supports her case.

IAAF and IOC rules set limits to female hyperandrogenism, which is deemed an unfair advantage that erodes female sports integrity. While these rules have been contested with regard to their scientific and ethical aspects, this is the first time that they will be debated in court. This appeal could have far-reaching ramifications for the sports world. It does not only seek to pave the way for a better ‘deal’ for female athletes with hyperandrogenism, who are coerced into hormonal treatment and even surgeries to ‘normalise’ themselves as women[2], but it rather brings the CAS, for the first time, before the thorny question:

How to strike a right balance between the core principle of ‘fair play’ and norms of non-discrimination, in cases where a determination of who qualifies as a ‘woman’ for the purposes of sport has to be made? More...

The O’Bannon Case: The end of the US college sport’s amateurism model? By Zygimantas Juska

On 8 August, U.S. District Judge Claudia Wilken ruled in favour of former UCLA basketball player O'Bannon and 19 others, declaring that NCAA's longstanding refusal to compensate athletes for the use of their name, image and likenesses (NILs) violates US antitrust laws. In particular, the long-held amateurism justification promoted by the NCAA was deemed unconvincing.

On 14 November, the NCAA has appealed the judgment, claiming that federal judge erred in law by not applying a 1984 Supreme Court ruling. One week later, the NCAA received support from leading antitrust professors who are challenging the Judge Wilken’s reasoning in an amicus curiae. They are concerned that the judgment may jeopardize the proper regulation of college athletics. The professors argued that if Wilken’s judgment is upheld, it

would substantially expand the power of the federal courts to alter organizational rules that serve important social and academic interests…This approach expands the ‘less restrictive alternative prong’ of the antitrust rule of reason well beyond any appropriate boundaries and would install the judiciary as a regulatory agency for collegiate athletics”.   

More...

Asser International Sports Law Blog | UEFA’s FFP out in the open: The Dynamo Moscow Case

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

UEFA’s FFP out in the open: The Dynamo Moscow Case

Ever since UEFA started imposing disciplinary measures to football clubs for not complying with Financial Fair Play’s break-even requirement in 2014, it remained a mystery how UEFA’s disciplinary bodies were enforcing the Club Licensing and Financial Fair Play (“FFP”) regulations, what measures it was imposing, and what the justifications were for the imposition of these measures. For over a year, the general public could only take note of the 23 settlement agreements between Europe’s footballing body and the clubs. The evidential obstacle for a proper analysis was that the actual settlements remained confidential, as was stressed in several of our previous Blogs.[1] The information provided by the press releases lacked the necessary information to answer the abovementioned questions.

On 24 April 2015, the UEFA Club Financial Control Body lifted part of the veil by referring FC Dynamo Moscow to the Adjudicatory Body. Finally, the Adjudicatory Body had the opportunity to decide on a “FFP case. The anxiously-awaited Decision was reached by the Adjudicatory Chamber on 19 June and published not long after. Now that the Decision has been made public, a new stage of the debate regarding UEFA’s FFP policy can start.

This blog will firstly outline the facts of the FC Dynamo case and describe how and to what extent FC Dynamo breached the FFP rules. Secondly, the argumentation and the disciplinary measures imposed by the Adjudicatory Chamber will be scrutinized and compared to the measures imposed on other football clubs who, unlike FC Dynamo, were capable of reaching a settlement with UEFA.


The build-up to the Decision

After the CFCB Investigatory Chamber met to assess FC Dynamo’s monitoring documentation in August 2014, it quickly became apparent that FC Dynamo had a break-even deficit. The deficit amounted to €13,231,000 for 2012 and €23,593,000 for 2013, giving an aggregate total of €36,824,000.[2] What was more important for the assessment, however, was the close relationship the Russian football club had (and still has) with JSC VTB Bank (“VTB”). VTB is both the main shareholder in FC Dynamo (holding 74% of the shares in the club) and the club’s principal sponsor.[3] In accordance with Article 58(1) of the FFP regulations, the relevant income under the regulations includes the revenue derived from sponsorship and advertising. Furthermore, as is stipulated in paragraph 4 of that same Article, relevant income from related parties (such as sponsors) must be adjusted to reflect the fair value of any such transactions. Thus, the CFCB Chief Investigator requested a copy of the sponsorship agreement between FC Dynamo and VTB in order to assess whether it was in conformity with the “fair value” requirement.[4] The documentation that FC Dynamo provided was based on a separate valuation report by the firm ‘Repucom’.

The results of the calculations made by the Investigatory Chamber are staggering. Where the break-even deficit without taking into account the sponsorship agreement amounted to €36,824,000 for 2012 and 2013, the final number, after “fair value” adjustment of the sponsorship agreement, amounts to a whopping €192,557,000. These results are shown in the following table, which is taken from the Decision.

Table 1[5]

Given that the investigations of the Investigatory Chamber were taking place towards the end of the monitoring period 2014, the Chamber asked the Russian football federation to send updated monitoring information covering the year 2014.[6] In order to calculate the updated break-even result, it included a second valuation report done by PWC, in addition to the Repucom report. The final break-even result for the monitoring years 2012-2014 is €302,268,000, as can be seen in the second table below.


Table 2[7]

In accordance with Article 61 (2) of the FFP Regulations, the acceptable deviation from the break-even requirement is €45,000,000 for the monitoring period assessed in the seasons 2013/14 and 2014/15. Therefore, in order to determine the aggregate total of FC Dynamo’s break-even deficit is €302,268,000 - €45,000,000 = €257,268,000 (see table 3).

Table 3[8]

An aggregate break-even deficit of €257,268,000 is incredibly high. Especially if one takes into account that the break-even deficit for the years 2012 and 2013 without the sponsorship agreement amounted to “only” €36,824,000. Even though both the fair value of the VTB sponsorship agreement declared by FC Dynamo and the fair value adjustment according to the Investigatory Chamber have been censored[9] in the Decision, one can safely assume that the adjusted value of the sponsorship agreement was roughly €200,000,000 less than what FC Dynamo was receiving from VTB over a period of three years.

In March 2015, the Chief Investigator informed FC Dynamo that UEFA would withold the revenue obtained by the club in European competition.[10] Not long after this decision, on 27 March a meeting was held between the Investigatory Chamber and FC Dynamo. Though the details of the meeting remain unknown, evidently no settlement between the club and the Investigatory Chamber was reached, thereby making FC Dynamo the first club failing to do so. As a consequence of the parties’ failure of reaching a settlement agreement, the Chief Investigator referred the case to the Adjudicatory Chamber. Moreover, in addition to the referal of the case in accordance with Article 14(1) of the Procedural Rules governing the UEFA Financial Control Body to the Adjudicatory Chamber, the Chief Investigator suggested that FC Dynamo were to be excluded from at least one UEFA club competition for which FC Dynamo would qualify in the future, and advocated a fine of at least €1,000,000.[11]

Pursuant to Articles 20(1) and 23(1) of the Procedural rules, the Adjudicatory Chamber asked FC Dynamo to submit its observations and convened an oral hearing with the club on 16 June 2015.[12] Having received all the information it required, the Adjudicatory Chamber proceeded to formulate its final Decision in accordance with Article 27 of the Procedural Rules.[13]


The Adjudicatory Chamber’s Decision

The Adjudicatory Chamber agreed with the Investigatory Chamber that the key issue in the FC Dynamo case is the valuation of the sponsorship agreement with VTB. The Chamber accepted that this value had to be adjusted to a fair value and that the Expert Reports (Repucom and PWC) were an appropriate basis to do so.[14] Mostly, the Chamber based its final decision on the Investigatory Chamber’s findings. In the end, it concluded that, “no matter which Expert Report valuations are used, the Club has failed to fulfil the break-even requirement because it had an aggregate break-even deficit within the range set out in Paragraph 58” of the FFP Regulations.[15]

FC Dynamo was granted the opportunity to explain and justify why it had failed to meet the break-even requirement. The club’s arguments can be summarized as follows:

1.            The Russian television market generates less revenues than the television market in other European States, thereby creating an economic disadvantage for the Russian clubs.[16]

2.            The Russian league imposes restrictions on foreign players.[17]

3.            The Russian clubs have suffered economically from the fluctuating exchange rates.[18]


The Adjudicatory Chamber counter argued as follows:

1.            Other European States also generate less revenue from television. However, their clubs comply with FFP rules.[19]

2.            A vast majority of European leagues are subject to limitations regarding the use of foreign players. Russia is not “special” in that regard.[20]

3.            Changes in exchange rates may have had an adverse impact on FC Dynamo’s liability under a loan denominated in Euros. However, this did not result in an adverse impact on the Club’s break-even result. Furthermore, it must be remembered that the impact of such fluctuations can be reasonably considered negligible in the context of FC Dynamo’s overwhelming failure to comply with the break-even Requirement.[21]

FC Dynamo’s financial projections and the Compliance Plan

In the observations submitted by FC Dynamo to the Adjudicatory Chamber, the club also presented plans that will allow it to fulfil the break-even requirement in the future. First of all, FC Dynamo’s plans for a new stadium will allow it to generate more revenue.[22] Secondly, the club indicated that it was seeking new investment in the club by means of selling shares and that it will enjoy increased revenues from new sponsorship and retail opportunities. [23] In addition to the financial projections, FC Dynamo also held that it had introduced new internal guidelines to govern its transfer activities (including a salary cap) and has suggested that an emphasis will be placed on more youth players being promoted to the first team.[24]

Again the Chamber was not convinced. FC Dynamo’s proposals were deemed “vague in substance and its projections appear overly optimistic. Whilst the Club’s good faith throughout the proceedings and acknowledgement that it must adjust its business model is welcomed, its proposed route to compliance with the Break-even Requirement is far from certain.”[25] As regards the stadium, since it will not be owned by FC Dynamo itself[26], the Chamber argued that it remains unclear whether it will generate more revenue. And even if it does, this will not happen before 2018. It also remains uncertain whether FC Dynamo will attract new investment. The Chamber is aware of VTB’s plans to sell its shares, but is uncertain if any sale can be effected in the near future. The potential buyer of these shares, Dynamo Sports Society, and VTB have only signed a non-committal intention clause regarding the transfer.[27] Further, the Chamber deems it unlikely that FC Dynamo will comply with the break-even requirement through increased sponsorship revenue. As FC Dynamo itself pointed out in its observations, “unfavourable economic conditions” may make it difficult to attract new investment.[28] More importantly, “having regard to the scale of the Club’s failure to fulfil the Break-even Requirement, even a strong increase in revenues from commercial activities and player sales would be unlikely to bring about FC Dynamo’s sustained and consistent compliance with the Break-even Requirement, for so long as the related party issues surrounding VTB’s involvement with the Club persist”.[29] Lastly, the Chamber welcomes the club’s ambition to reform its transfer activities and place more emphasis on youth players, but similarly held that there is no guarantee that FC Dynamo will actually comply with such policies.[30]

Disciplinary Measures

According to the Chamber, FC Dynamo failed to justify the break-even deficit convincingly and, consequently, faced disciplinary measures. By form of reminder, the Chamber stressed that the objectives of the FFP Regulations included the encouragement of clubs to operate on the basis of their own revenues and, thus, the protection of the long-term viability and sustainability of European football. Furthermore, the principle that all clubs competing in UEFA’s club competitions must be treated equally underpins the Regulations. Since not meeting the break-even requirement may directly affect the competitive position of a club, to the detriment of clubs who comply with the FFP Regulations, this principle has even greater force.[31]

The main, and extreme, disciplinary measure imposed by the Chamber upon FC Dynamo, consists of an exclusion from the next UEFA club competition for which the club would otherwise qualify in the next four seasons (i.e. the 2015/16, 2016/17, 2017/18 and 2018/19 seasons).  Given the scale of the club’s failure to comply with the break-even requirement, the measure is regarded by the Chamber as the “only appropriate measure to deal with the circumstances of this case”.[32] As for FC Dynamo, under Article 34(2) of the Procedural Rules, it had 10 days to appeal the Decision in writing in front of the CAS.  


Concluding remarks

First and foremost, the exclusion from European competitions as a disciplinary measure has, so far, only been imposed on FC Dynamo. None of the club with whom the Investigatory Chamber had reached settlement agreements have been excluded from European competitions for breaching the break-even requirement.[33] The Adjudicatory Chamber had stated numerous times in its Decision that the key factor in the FC Dynamo’s case was the scale of the club’s failure to comply with the break-even requirement. From an objective point of view, a break-even deficit of €257,268,000 is very high indeed. In the view of the Chamber, it justified such a far going disciplinary measure. The question remains, however, what the break-even deficit was for those clubs who managed to reach settlement agreements. Was the break-even deficit for clubs like Manchester City and PSG lower or higher than 257 million? If it was equal or higher than this amount, how did these clubs manage to settle where FC Dynamo failed? Would the measures imposed on FC Dynamo be considered proportionate if other clubs had the same or higher break-even deficit?

On a different note, the FC Dynamo case does allow us to understand better the rationale behind the Adjudicatory Chamber’s decision to impose certain disciplinary measures. It is interesting to see how much weight it places on sponsorship agreements that, according to the Chamber, do not represent a fair market value. This is not only useful information for football clubs, but also to third parties who might be interested in sponsoring a football club. On a downside, we will probably never know exactly what the value of the sponsorship agreement was according to the club, and how it was adjusted by the two Chambers. Even though FC Dynamo had the right to keep certain information confidential, knowing the two figures would have helped us to better understand the reasoning used by the Chambers in reaching their decisions and choosing to exclude FC Dynamo from UEFA competitions.

Finally, these are still crucial times as regards the functioning and the legality of UEFA’s FFP rules. The rules are being challenged in front of both the French and Belgium courts as we speak and there is always the possibility (though remote, see our blog) of the European Courts having to judge on the matter. A challenge in front of the CAS could be seen as a welcome contribution to test the legality, the functioning and the proportionality of the rules. Though it is currently unknown whether FC Dynamo has made use of the opportunity to appeal the case to the CAS.



[1] See e.g.: Luis Torres, “Financial Fair Play: Lessons from the 2014 and 2015 settlement practice of UEFA” (8 June 2015); and Oskar van Maren, “The Nine FFP Settlement Agreements: UEFA did not go the full nine yards” (19 May 2014).

[2] Decision in Case AC-02/2015 CJSC Football Club Dynamo Moscow of 19 June 2015, para. 5.

[3] Ibid, para. 56.

[4] Ibid, paras. 7-10.

[5] Ibid, para. 11.

[6] Ibid, para. 8.

[7] Ibid, para. 15.

[8] Ibid, para. 24.

[9] Under Article 33(3) of the Procedural Rules Governing the UEFA Financial Control Body, “the adjudicatory chamber may, following a reasoned request from the defendant made within two days from the date of communication of the decision, redact the decision to protect confidential information or personal data”.

[10] Decision in Case AC-02/2015, para. 17.

[11] Ibid, para. 25.

[12] Ibid, paras. 28-31.

[13] Under Article 27 of the Procedural Rules, the adjudicatory chamber may take the following final decisions:

a) to dismiss the case; or

b) to accept or reject the club’s admission to the UEFA club competition in question; or

c) to impose disciplinary measures in accordance with the present rules; or

d) to uphold, reject, or modify a decision of the CFCB chief investigator.

[14] Decision in Case AC-02/2015, para. 56.

[15] Ibid, para. 60.

[16] Ibid, para. 67.

[17] Ibid, para. 70.

[18] Ibid, para. 72.

[19] Ibid, paras. 68 and 69.

[20] Ibid, para. 71.

[21] Ibid, paras. 73-75.

[22] Ibid, para. 84.

[23] Ibid, paras. 89 and 94

[24] Ibid, para. 97.

[25] Ibid, para. 83.

[26] According to para. 85, the stadium will be owned and operated by a separate legal entity named ‘Assets Management Company Dynamo’.

[27] Ibid, paras. 89-90

[28] Ibid, para. 91.

[29] Ibid, para. 96.

[30] Ibid, para. 97.

[31] Ibid, paras. 77-80

[32] Ibid, paras. 101-102

[33] For more information on the settlements agreements, see our blog from 9 June 2015.

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