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.

Investigations into potential aid granted to Dinamo are not something new. Croatia’s most successful club was already under scrutiny by the Croatian Competition Agency (CCA) prior to the country joining the EU on 1 July 2013. In a highly controversial decision dated from 13 June 2013, the CCA decided to terminate the proceedings. With Croatia joining the EU, the CCA ceased to have the legal competence to carry out State aid investigations. Instead, the European Commission has the exclusive competence to deal with the Dinamo Zagreb case.

It is no secret that football and politics, including direct State intervention, go hand-in-hand in many EU Member States. Remarks made by Spanish Government officials after news broke out that the Commission commenced formal investigations relating to Spanish clubs illustrate this point, thereby making it more sensitive for the Commission to decide these cases.

In that sense, the Dinamo Zagreb case could prove a real snake pit, since State funding of professional sports undertakings is authorised by a national law known as the “Sports Act”. In Naš Hajduk’s eyes, joining the EU has not changed existing practices since Dinamo is still receiving unlawful State aid. In fact, they believe that the main reason for the City of Zagreb’s public funding is to preserve the dominant position of Dinamo Zagreb in Croatian football. Furthermore, according to the complainant, the CCA’s decision to declare the aid compatible with Croatian national law was unjustifiable because the CCA did not correctly interpret the relevant provisions stipulated in the Stabilisation and Association Agreement between the European Communities and its Member States and the Republic of Croatia and the Treaty concerning the accession to the EU of the Republic of Croatia. 

This blog post will briefly discuss the measures imposed by the relevant Croatian authorities regarding public funding to Croatian sporting entities in general and Dinamo Zagreb in particular in light of the decision of the CCA. Furthermore, now that a complaint has been lodged with the Commission, I will analyse the key legal issues raised by the case.  

Background

Since Croatia gained its independence from Yugoslavia in 1991, GNK Dinamo Zagreb has been the country’s most successful football club by a distance. It has won 16 national championships in total, and is currently well on its way to win its 10^th consecutive title. Notwithstanding all the sporting success, it has suffered great financial difficulties in this period of time, which climaxed in a Croatian Court declaring the football club bankrupt in 2002. However, after restructuring the club, Dinamo was allowed to remain active in the highest professional football league of Croatia.[1]

Since the introduction of the latest version of the Sports Act in 2006, Dinamo has been consistently included in the public financing programs adopted on the basis of Articles 74-76 (Sport Financing) of this Act. Article 75 allows public funding in sport on State level, whereas Article 76 allows for public funding in sport on regional and local level. Article 76 (1) lists the types of programs that are suitable for public finding. The list includes: implementing sporting activities of children, youth and students; sports preparations, Croatian and international competitions, as well as the general and special health protection of athletes; hiring persons to do professional work in sports and; planning, construction, maintenance and use of sports facilities important to the public authorities.[2]

In Zagreb, for example, the system of public funding works as follows: The Zagreb Sports Association (SSGZ), a public institution or “sports community” created by the City of Zagreb, submits a proposal to the city regarding the public needs for sport within the city.[3] The final decision on this proposal and the annual budget for the public needs for sporting entities within the city lies with the governing body of the City of Zagreb in accordance with Article 74 (2) and 76 (4).

In general terms, the program on public funding in sport of the SSGZ includes:

• Investing in the development of young athletes;

• Encouraging participation in sport for larger number of citizens, especially children and youth.

However, the program also includes:

• Improving the quality of elite professional sport that encourages the development of sport and contributes to the reputation of the City of Zagreb

• Planning, construction, maintenance and use of sports facilities important to the City of Zagreb.

The criteria of what can be considered “elite professional sport” are found in the Conclusion on the allocation criteria for the promotion of professional sport.[4] Funding for elite professional sport could be awarded to all sporting entities who have won a European title, who have gained the right to participate in European competitions, or that are successful in domestic and/or European professional competitions. Based on these criteria, special agreements were signed between the City of Zagreb and elite professional sport entities such as basketball club KK Cibona, waterpolo club HAVK Mladost, handball club RK Lokomotiva Zagreb and football club GNK Dinamo Zagreb.[5]

The City of Zagreb argued that public funding to these elite sport clubs was needed because the private market did not provide sufficient sponsor money in order for these clubs to compete at an adequate competitive level. Nonetheless, the complaints were launched by people who believe that the part of the program that allows specific funding for elite professional sport creates a financial advantage for a selective groups of professional sport clubs, which in turn can lead to unlawful State aid under EU law or under article 70 (1) (iii) of the Stabilisation and Association Agreement.[6] It was therefore no great surprise that the Croatian Competition Agency was urged to decide whether the public funding to one of the recipients, Dinamo Zagreb, amounted to a breach of the EU State aid rules. 

The CCA’s decision

The CCA considered the measures not to constitute unlawful State aid under the Stabilisation and Association Agreement.[7] More specifically, the CCA argued that until Croatia joined the EU on 1 July 2013, the City of Zagreb complied with all the requisites of the Program of public needs in sport and with Article 76 of the Sports Act. Given that “the Sports Act, which is in force and applicable in the Republic of Croatia (…), enables the financing of professional sports by local and regional governments, including the City of Zagreb, the (CCA) has found that there are no legal requirements for assessing whether the resources assigned to Dinamo Zagreb (should be) considered illegal state aid.”[8]

However, the CCA underlined that from the date of accession onwards EU Law will be applicable to Croatia and recognised that the Sport Act could contradict the EU State aid rules.[9]  Consequently, the CCA recommended the Croatian legislator to reformulate the relevant provisions in the Sports Act.[10] Therefore, since joining the EU the Sports Act contains a new paragraph which reads as follows: In accordance with the provisions of (the Sports Act), the financing of professional sports by the national, regional and local governments of Croatia and the city of Zagreb that effects trade between the Croatian State and other EU Member States is only possible if (the financing) is in line with the rules regarding State aid.[11] However, according to the CCA, with Croatia joining the EU, the CCA seized to have the competence for carrying out further State aid investigations for the measures granted to Dinamo Zagreb from both before as after the date of accession.[12]

The question whether aid granted to Dinamo Zagreb specifically due to a lack of sponsor money constituted unlawful State aid was also discussed by the CCA in its decision. In the end, the CCA held that it was “unable to determine whether the sponsoring contracts signed between publicly owned legal persons and (Dinamo Zagreb) contained State aid due to the following: from 2010 to 2012 (Dinamo Zagreb) did not receive financing from sponsoring contracts concluded with (public entity) Zagrebacki Holding, whereas at the moment of signing of the concerned contracts (public entity) Croatia Osiguranje acted as a market economy investor while the City of Zagreb Tourist Board and (public entity) Hrvatska Elektroprivreda signed sponsoring contracts not only with (Dinamo Zagreb) but also with other professional sport clubs.”[13]

The CCA’s decision to consider the public funding in line with the Sports Act and the Program of public needs in sport was heavily criticised, especially by Naš Hajduk. In their view, the CCA erred in their decision to justify the aid granted to Dinamo Zagreb. Their second concern involves the funding programs themselves, which are still in place after Croatia’s accession to the EU. Since 2006, Dinamo has received up to 244 million Kuna (31.7 million Euro) by the City of Zagreb for a variety of services, and there is no indication that the City of Zagreb is planning to seize the funding any time soon.  

The complainants’ arguments

Firstly, the complaint stipulates that Dinamo Zagreb is receiving unlawful State aid because it is allowed to use the Maksimir Stadium and several training grounds free of charge. This “free of charge lease agreement” has been anchored in several agreements signed between the City of Zagreb and Dinamo Zagreb, the latest of which being signed on 13 October 2011 for a period of five years with the possibility of extending that lease. Using the football stadium and the training grounds for free constitutes a selective advantage, they argue, because no private operator would consider leasing out real estate free of charge.

Secondly, Naš Hajduk argues that the maintenance costs of the stadium are not being paid by Dinamo Zagreb, but by the City of Zagreb. In fact, the maintenance costs for the period 2010 – 2014 amounted to 4.8 million Euro. This amount can be considered as an unlawful aid granted to Dinamo Zagreb.

Thirdly, the City of Zagreb has funded (and still does) the operating costs of “sport clubs of a particular importance for the city”. Operating costs include: Youth development and expenses made by Dinamo Zagreb’s youth categories; travel and accommodation costs for matches played in European competitions, international friendlies and training programs; the organisation of home games in European competitions; and “other development programs”.

Fourthly, Naš Hajduk regards the fact that the City of Zagreb has (partially) paid the salaries of the football trainers working for Dinamo for the last three years as further evidence of unlawful State aid. As a rough average, the city pays the club 100.000 Kuna (13.000 Euro) a year per trainer. According to the complainant, 30 trainers received this amount in 2012, 23 in 2013 and 22 in 2014. In fact, the operating costs and the payment of trainer salaries combined would amount to nearly 4.9 million Euros.

Fifthly, in addition to describing which measures should be deemed as unlawful State aid, Naš Hajduk argued in the complaint that regardless of whether the measures are considered illegal State aid or not, the Croatian authorities failed to meet their notification obligation as stipulated in Article 108 (3) TFEU and Article 2 of the Procedural Regulations 659/1999. A notification by the Croatian authorities, they argue, is not just a procedural obligation for Member States, but it would also lead to greater transparency on public funding and would take away any doubts disagreeing citizens, such as themselves, might have about how the State spends public money.

Lastly, the complainant pointed out to the Commission that the CCA erred in its decision to justify the public funding under the national Sports Act. The principle of supremacy of EU law is also applicable as regards accession treaties such as the Stabilisation and Association Agreement between the European Communities and its Member States and the Republic of Croatia and the Treaty concerning the accession to the EU of the Republic of Croatia.  

Is Dinamo Zagreb receiving (unlawful) State aid?

Naš Hajduk believes, and perhaps rightly so, that the advantages gained by the free of charge lease contract, the maintenance costs of the stadium, the operating costs reimbursements and the trainer salaries cannot be justified because of “lack of sponsorship from the private sector”. Moreover, as regards the lease and maintenance agreements between the club and the city, there is a realistic possibility that the City of Zagreb did not behave in accordance with the Market Economy Investor Principle[14] and that Dinamo gained a financial advantage from these deals. It would not be the first time that the Commission would find such agreements contrary to Article 107 (1) TFEU. For example, in its decision regarding alleged municipal aid to several professional Dutch football clubs, the Commission found that the payment agreement between the municipality of Tilburg and the football club Willem II for the stadium provided a selective advantage to Willem II with the use of public resources. In essence, the Commission accepted the possibility that stadiums belonging to municipalities that are not rented out at market conditions to professional football clubs could entail State aid.[15]

Similarly, it cannot be denied that an undertaking would gain a financial advantage if the public authorities were to fund a large part of its operational costs, such as travel expenses, accommodation costs and (youth) trainings. The question remains however, whether the payment by the City of Zagreb of the operational costs endured by Dinamo Zagreb are selective. It is important to note the legal basis for the measures are found in the Sports Act, which is applicable in the entire Republic of Croatia. Even though it is not clear whether the public funding granted to other sport clubs in Zagreb differed from the public funding granted to the football club Dinamo, the measures do appear to be selective. Firstly, the criteria for public funding set by the SSGZ distinguish between professional sport that can be considered elite and (professional) sport not considered elite. Because Dinamo is considered an “elite professional sports clubs”, it is entitled to receive public funding. However, other professional sporting entities that are not considered “elite professional sports clubs” do not receive this public funding. Therefore, if the contested measures by the City of Zagreb are solely granted to Dinamo Zagreb for being an “elite sporting entity”, the measures could be considered selective in the light of Article 107 (1) TFEU. Secondly, the selectivity criterion should also be assessed by comparing how different regional and local governments fund their respective “elite sporting entities”. Once a discrepancy is found from one region to another regarding the amount of money granted to sports (i.e. because some local governments simply have more money to spend), the measure could be deemed selective.

Apart from determining whether the public funding of Dinamo could entail State aid, as is the case with all State aid cases, one has to look at possible arguments that could justify the measures. Keeping in mind recent State aid decisions, it becomes clear that measures that support sport’s educational, public health, social and recreational functions will be declared compatible with EU law.[16] It is therefore worth remembering that Article 76 (1) of the Croatian Sports Act, also includes the possibility of public funding with the aim of implementing sporting activities of children, youths and students, protecting the health of athletes and hiring persons to do professional work in sports. Furthermore, on numerous occasions in the last few years, the European Commission has declared State aid provided for sports infrastructure compatible, with EU law.[17]

The facts of the Dinamo Zagreb case show that at least part of the aid measures are aimed at supporting the educational functions of sport, i.e. covering expenses of Dinamo’s youth teams. Moreover, the City of Zagreb’s decision to aid Dinamo paying for the maintenance costs of the stadium and training grounds could show similarities with Commission decisions where such aid was declared justified. These measures may, in principle, be compatible with EU law, where there is a clear common objective. However, the positive effects on the common objective must outweigh the negative effects on competition and trade in order for these measures to be compatible with EU law. Therefore, in the Dinamo Zagreb case, this balancing test has to determine whether the objectives of the measures (i.e. improving the quality of elite professional sport that contributes to the reputation of the City of Zagreb and the planning, construction, maintenance and use of sports facilities important to the City of Zagreb) outweigh the negative effects this could have on other entities in general, and football clubs in particular.

In addition, it should not be forgotten that Croatia joined the EU on 1 July 2013. This means that Dinamo Zagreb received the contested aid before and after the date of accession. Therefore, another key question is to what extent the Commission can sanction Croatia for aid measures implemented before the accession date. It follows from settled EU case law that Articles 107 – 109 TFEU and the Procedural Regulations 659/1999 are applicable on to a Member State only as from its accession to the European Union.[18] Moreover, it follows inter alia from EU case law[19], and Article 19 of the Procedural Regulations that existing aid can be found to be incompatible with prospective effect only. With regard to the Dinamo Zagreb case, this effectively means that the Commission can only order a recovery of the aid granted to the football club after the date of accession. Therefore, should the Commission, for example, decide that the stadium lease agreement (signed in 2011) constitutes unlawful State aid, it can only order the recovery of the advantage gained through this agreement as of 1 July 2013.

The last point that Naš Hajduk addressed in their complaint to the Commission that the CCA incorrectly allowed the aid to be granted to Dinamo because it was compatible with Croatian national law. Irrespective of whether the CCA interpreted the Accession Treaties correctly or incorrectly, it is my understanding that EU law does not allow the Commission the power to overrule the CCA’s decision. As has been stated above, since the Commission can only order the recovery of the aid granted after the date of accession, it has no competence to decisions made regarding State aid before the date of accession. In other words, any options Naš Hajduk could have in challenging the CCA’s decision have to be found in national appeal procedures.

The Dinamo Zagreb State aid case currently finds itself in a preliminary investigatory phase. Given the Commission’s inconsistency regarding the time frames to decide whether to commence formal investigations or not, it is impossible to say if we can expect news from Brussels any time soon. Nonetheless, this case will certainly drive forward the discussion in the quickly expanding field of State aid and sport.

[1] Vanja Smokvina, “Case Law of the Croatian Supreme Court in the Fields of Sports Law – Emphasis on Labour Relations”, International Sports Law Journal, 2012/1-2, pages 106 - 108

[2] Article 76 (1) points 2, 4, 5 and 8 of the Sports Act

[3] Article 76 (2) of the Sports Act

[4] A Croatian version of the Program is available on: http://www.zagreb.hr/default.aspx?id=60227.

^[5] CCA UP/I 430-01/13-05/001, Financing of the Football Club Dinamo by the City of Zagreb and other publicly owned legal entities, pages 7 – 10 (Croatian version).

[6] Article 70 (1) (iii): “The following are incompatible with the proper functioning of the Agreement, in so far as they may affect trade between the Community and Croatia: any State aid which distorts or threatens to distort competition by favouring certain undertakings or certain products.”

[7] CCA UP/I 430-01/13-05/001, Financing of the Football Club Dinamo by the City of Zagreb and other publicly owned legal entities, (English version), page 1

[8] CCA UP/I 430-01/13-05/001, Financing of the Football Club Dinamo by the City of Zagreb and other publicly owned legal entities, pages 19

[9] Ibid, page 18

[10] Tatjana Jakovljević, “Public Support for Sports: The Name of the Game – Football!”, EStAL, 3/2013, page 445

[11] Article 74 (3) of the Sports Act

[12] CCA UP/I 430-01/13-05/001, Financing of the Football Club Dinamo by the City of Zagreb and other publicly owned legal entities, (English version), page 1

[13] Ibid

[14] The essence of the MEIP is that when a public authority invests in an enterprise on terms and in conditions which would be acceptable to a private investor operating under normal market economy conditions, the investment is not a State aid.

[15] SA.33584 – Alleged municipal aid to professional Dutch football clubs Vitesse, NEC, Willem II, MVV, PSV and FC Den Bosch in 2008-2011, paras. 51-52

[16] See for example: SA.31722 - Supporting the Hungarian sport sector via tax benefit scheme

[17] See for example: SA.37109 – Football Stadiums in Flanders; SA.35440 - Multifunktionsarena der Stadt Jena and; SA.37342 - Regional Stadia Development in Northern Ireland

[18] Case C-262/11 Kremikovtzi AD, paragraph 50

[19] Ibid, paragraph 54

Editor’s note
Wil is working as a lawyer since 1980. He started his legal career at Rechtshulp Rotterdam. Later on he worked for the Dutch national trade union FNV and law firm Varrolaan Advocaten. Currently he is participating in the Labour Law Section of lawfirm MHZ-advocaten in Schiedam in the Netherlands. He is also a member of a joint committee advising the government in labour issues.

Since 1991 he is dealing with the labour issues of the trade union for professional football players VVCS and cyclists’ union VVBW. Since 2002, he works for FIFPro, the worldwide union for professional football players based in Hoofddorp in the Netherlands. He is involved in many international football cases and provides legal support for FIFPro members all over the world. Wil was also involved in the FIFPro Black Book campaign on match fixing and corruption in Eastern Europe.

On the 2001 agreement between FIFA, UEFA and the European Commission:

What was FIFPro’s role in the negotiations leading to the 2001 agreement with the EU Commission on which the current FIFA Regulations on the Status and Transfers of Players (RSTP) are based?

First the negotiations started between the Commission and FIFA/UEFA. Later on FIFPro joined as the Commission found it necessary to involve the players. From then on FIFPro was at the table and able to have influence. It proved not to be the level of influence we hoped to have.

To what extent was FIFPro (dis)satisfied with the agreement at that time?

The outcome of the negotiations was a compromise but to a certain extent acceptable for FIFPro as it was to improve in principle the situation of players. At that time, it seemed that free movement was accessible for them. Yet, the fact that the Commission did not subsequently evaluate the system - as agreed in 2001 - was disappointing.

On the current complaint: 

Why is FIFPro challenging the FIFA RSTP under EU Competition law? What has changed?

After a short while since 2001 we concluded that the way the informal agreement with the Commission was formulated in the RSTP was not consistent with what had been agreed. The clearest example is the repetition of the protected period after a contract was extended.

The parties agreed on a single protected period after a player signed his first contract with a club in order to preserve the stability of club squads and to allow them to amortize the investments made on acquiring these players. After this period the relation between a club and a player was intended to be a regular labour relation.

On several occasions the Commission confirmed that after the protected period the compensation to be paid in case of premature termination would be calculated based on the residual value of the contract. As the protected period re-starts in case of contract renewal, players never reach this situation. Players who refuse to sign a new contract are regularly side-lined by their clubs in order to force them to sign a prolongation. This is limiting the freedom of movement of players significantly and has substantial anti-competitive effects.

More precisely, are you challenging specific articles of the FIFA RSTP? If so, why do you deem those provisions in particular to have an anti-competitive effect or object?

When evaluating the RSTP internally, FIFPro identified twenty-three key issues on which the transfer system was failing the players. As we decided to lodge a complaint on an EU competition law basis, we picked out the strongest arguments for the purpose of substantiating our complaint. The repetition in the protected period is an example[1].

Could these alleged anti-competitive effects not be justified along the lines of the Wouters test[2] as being inherent to the achievement of legitimate objectives such as competitive balance or contractual stability?

It is important to notice that there is no transfer system in other sports and they seem to work fine. This means that a transfer system is not a necessity as such. The abuses we witness nowadays, especially non-payment of players is a direct consequence of the way the system works. We strongly believe that the restrictive effects are not inherent in the pursuit of any objectives. They certainly are not proportionate to them. FIFPro is convinced that the restrictive aspects of the system do not pass the Wouters test.

What is the rationale for going to the EU Commission and not, for example, to the national courts (or national competition authorities for that matter)?

First of all it was the Commission that initiated the process towards the new regulations in 2001. Now that we see the system failing it seems logical to approach the Commission first. As we are looking at a pan-European problem this forum would be more effective than national proceedings. But in case the complaint does not provide an appropriate result the way to national courts and national competition authorities is still open.

Did you envisage some non-confrontational strategies to change the FIFA RSTP through negotiations? What about using the European social dialogue committee for example?

The initial Social Dialogue meetings started eleven years ago. Although we concluded an autonomous agreement in 2012 we must conclude that the most serious problems for our players have not been solved through this mechanism nor have they been successfully tackled through our participation in the working groups and committees of FIFA and UEFA.

The problem of overdue payables is more serious than ever before. FIFPro feels that more pressure is needed to move things forward. The fact that we lodged the complaint does not mean that we stop negotiating. On the contrary, if our counterparts in the social dialogue are willing to solve the issues we put on the table we would prefer this over a long-lasting legal struggle.

Finally, don’t you think that this complaint could lead to a form of European imperialism? In other words, European institutions, clubs and players dictating the transfer system applied worldwide? Should (and could) FIFA (or UEFA) aim for a different European transfer system instead?

Although we are a global organization we cannot deny the fact that the center of gravity of professional football is in Europe. Moreover, after the Bosman ruling it was obvious that the new FIFA regulations had to be in full compliance with EU-law principles. As these rules apply worldwide this means that EU-principles must be respected around the world. As EU law provides generally more protection to workers than a lot of other legal systems in the world the players benefit from this extraterritorial application. FIFPro does not consider this as imperialism. In fact, we believe that a single system is preferable because of the global character of professional football.

[1] Editor’s note: For more examples see FIFPro’s Executive Summary of the complaint.

[2] Editor’s note: The Wouters test is used for the assessment of the alleged anti-competitive nature of a measure, agreement or concerted practice under Article 101(1) TFEU. According to this test, account must be taken of the overall context of the FIFA RSTP and how it produces its effects. More particularly, account must be taken of its potential legitimate objectives. One must then evaluate whether the restrictive effects on competition are inherent in the pursuit of those objectives and proportionate.

On Monday 18 July 2016, Canadian lawyer Richard McLaren presented the Independent Person Report to the World Anti-Doping Agency (WADA), regarding the alleged Russian doping program surrounding the 2014 Sochi Winter Olympics. The report was expected to seriously threaten the participation of Russian Athletes to the rapidly approaching Rio Games, starting on 5 August. In the weekend prior to the report’s publishing, Reuters obtained a leaked letter drafted by the CEO’s of the US and Canadian anti-doping agencies, which according to the New York Times was backed by “antidoping officials from at least 10 nations— including those in the United States, Germany, Spain, Japan, Switzerland and Canada — and 20 athlete groups”, urging the International Olympic Committee (IOC) to ban all Russian athletes from the upcoming Olympics.

Source: http://ww4.hdnux.com/photos/50/23/01/10563667/3/920x920.jpg

During the press conference, McLaren listed his main findings, which are shocking, interesting and peculiar at same time. First, “the Moscow Laboratory operated, for the protection of doped Russian athletes, within a State-dictated failsafe system”. Second, “the Sochi Laboratory operated a unique sample swapping methodology to enable doped Russian athletes to compete at the Games”. Third, “the Ministry of Sport directed, controlled and oversaw the manipulation of athlete’s analytical results or sample swapping, with the active participation and assistance of the FSB (Russian federal security service), CSP (Centre of Sports Preparation in Russia), and both Moscow and Sochi Laboratories”.

Though the recent findings of the Independent Person Report should not be underestimated, yet it is only one piece of a complex jigsaw puzzle constituted by many reports and disciplinary decisions involving systemic doping in Russia over the last few years. One could compare it to a snowball rolling down the mountain continuously gaining speed and mass. The ball started rolling in December 2014 with an ARD broadcasted documentary titled Geheimsache Doping: Wie Russland seine Sieger macht (“Top Secret Doping: How Russia makes its Winners”). Less than two years later, Russian athletes might be excluded from participating at the Rio Olympic Games all together. The information now available on Russia’s systematic doping program would make an excellent movie script (one that has probably already been set in motion at a Hollywood studio). This blog, however, will more modestly provide a recap of the events leading up to the Independent Person Report, and assess its potential (short term) legal consequences. 

Episode 1: German investigative journalism and WADA’s response

As stated above, the unravelling of this doping story began in December 2014, with an ARD documentary, Geheimsache Doping: Wie Russland seine Sieger macht (“Top Secret Doping: How Russia makes its Winners”). Filmmaker Hajo Seppelt investigated rumors on widespread doping use by Russian athletes in preparation of and during the Winter Olympics held in Sochi. The film showed athletes, coaches and civil servants testifying, secret camera footage, audio recordings, and official documents, all pointing towards: systemic doping use within the All-Russia Athletics Federation (ARAF), corrupt practices regarding results management and the collection of samples. Implicated parties included athletes, coaches, trainers, doctors, the Russian State, the IAAF, the Moscow accredited laboratory and the Russian Anti-Doping Agency (RUSADA).

In response to the international stir, WADA, in December 2014, launched an Independent Commission to investigate the allegations made. The Commission consisted of former WADA chairman Richard Pound, Richard McLaren and WADA’s Chief Investigations Officer Jack Robertson. The first part of this commission’s findings was published on 9 November 2015.[1] In August 2015 the commission’s mandate was extended following the release of another Seppelt documentary “Doping – Top Secret: The Shadowy World of Athletics”. This resulted in a second report which was published on 14 January 2016.[2] Especially the former of the two “Pound Reports” is of particular interest.

First and foremost, it addresses the existence of “a deeply rooted culture of cheating”. The report insinuates that this culture of cheating existed since well before the Sochi Games. The coaches active in 2014 appear to be the crucial transferors of the knowledge they acquired at the time they were athletes themselves. Medical connections cultivated during their professional careers were passed on to the current generation of athletes. Athletes not wishing to be part of this system were likely to be “excommunicated” from top-level coaches and support.[3]

The second issue addressed is the exploitation of athletes. “Unethical behaviours and practices” by the people involved have become the norm. Coercion has been employed on athletes to make them participate in the doping program, for instance by informing them that “they would not be considered as part of the federation’s national team for competition”.[4]

The report’s third finding is a blatant unwillingness of Russian athletes to cooperate in the investigation. Nonetheless, the Pound Commission confirms a “consistent and systematic use of performance enhancing drugs by many Russian athletes”.[5]

Fourthly, it confirmed that, next to coaches, some Russian doctors and laboratory personnel equally acted as “enablers for systematic cheating”. It also pointed out “inadequate testing and poor compliance around testing standards”, as well as the malicious destruction of over 1400 samples, which were explicitly requested by WADA to be preserved.[6]

A fifth major discovery was the identification of corruption and bribery within the IAAF. The severity of the corruption allegations involving several highly placed members and officials of IAAF and the ARAF was such that this part of the investigation had to be transferred to the competent authorities for “potential criminal prosecutions”, i.e. Interpol (see the second Pound Report).[7]

The first Pound Report recommended provisional suspensions in respect of five athletes, four coaches and one medical doctor and identified some additional suspicious cases. It further asked WADA to declare both ARAF and RUSADA to be “code noncompliant” and to withdraw WADA’s accreditation of the Moscow laboratory, as well as to permanently remove the lab’s director from his position. The Report also recommended that the IAAF should suspend ARAF.[8]

A mere four days after the publication of the first Pound Report (13 November 2015) the IAAF provisionally suspended the Russian ARAF as an IAAF Member. As a result of this decision, athletes, and athlete support personnel from Russia could not compete in International Competitions expected, the Russian Olympic Committee (ROC) as well as its athletes did not take the decision lightly. In a request for arbitration filed at the Court of Arbitration for Sport (CAS) on 3 July 2016, the ROC and the 68 Russian Athletes asked the CAS 1) to review specific legal issues surrounding IAAF’s decision to suspend ARAF, and 2) to order that any Russian athlete who was not currently the subject of any period of ineligibility for the commission of an anti-doping rule violation be declared eligible to participate at the 2016 Olympic Games in Rio.[9] The outcome of the appeal will be discussed further below. 

Episode 2: The Independent Person Report

Meanwhile, on 8 May 2016, new far-reaching allegations concerning Russia’s doping program were made by newsmagazine 60 Minutes, and subsequently on 12 May, by the New York Times.[10] The primary source behind these articles was whistle-blower Grigory Rodchenkov, the former director of the Moscow and Sochi doping control laboratories who found refuge in an undisclosed location in the USA. This time around, the allegations were not limited to athletics, but involved all Russian athletes that competed at the Sochi Olympics.[11] In response to these claims, WADA announced that it would immediately probe the new Russian doping allegations brought forward, once again, by the press, and appointed an Independent Person (i.e. Richard McLaren) supported by a multidisciplinary team to conduct an investigation of the allegations made by Dr. Rodchenkov.[12]

McLaren was presented with a five-point investigation mandate:

“1. Establish whether there has been manipulation of the doping control process during the Sochi Games, including but not limited to, acts of tampering with the samples within the Sochi Laboratory.

2. Identify the modus operandi and those involved in such manipulation.

3. Identify any athlete that might have benefited from those alleged manipulations to conceal positive doping tests.

4. Identify if this Modus Operandi was also happening within Moscow Laboratory outside the period of the Sochi Games.

5. Determine other evidence or information held by Grigory Rodchenkov.”[13]

The Report first mentions the time constraints faced in drafting it. It explains, in relation to the third paragraph of the mandate, that the “compressed timeline” of the investigation (57 days) “did not permit compilation of data to establish an antidoping rule violation”, consequently that third paragraph should be deemed of lesser importance. This shortage of time also resulted in the fact that McLaren had to be selective in examining the large amount of data and information available to it. In other words, it could “only skimmed the surface of the extensive data available”.[14] Be that as it may, McLaren considered the found evidence to be established “beyond a reasonable doubt”.[15]

With due respect to both its mandate and its investigative limitations, McLaren made three key findings[16]:

A) The Moscow Laboratory operated, for the protection of doped Russian athletes, within a State-dictated failsafe system, described in the report as the Disappearing Positive Methodology;

B) The Sochi Laboratory operated a unique sample swapping methodology to enable doped Russian athletes to compete at the Games;

C) The Ministry of Sport directed, controlled and oversaw the manipulation of athlete’s analytical results or sample swapping, with the active participation and assistance of the FSB, CSP, and both Moscow and Sochi Laboratories.

The Independent Person Report makes account of a systemic state directed doping program, incentivized by the “very abysmal” medal count of the Russian Olympic athletes participating in the 2010 Vancouver Olympic Winter Games. A system where, under direction and control of Yuri Nagornykh, Russia’s deputy minister of sport, the laboratory was forced to change any positive result into a negative analytical finding, a method named by the McLaren team the “disappearing positive”.[17]

Nagornykh was informed of every positive analytical finding arising in the Moscow laboratory from 2011 onwards, which in itself is a violation of the WADA International Standard for Laboratories. The deputy minister was the linchpin that decided which athlete would benefit from a cover up and thus be protected and which athlete would not. If ordered to do so, laboratory personnel were required to report the sample as being negative in WADA’s anti-doping management system. Next, the laboratory personnel had to falsify the screen result in the laboratory information management system to show a negative laboratory result.[18] Conclusion, the shielded athlete could continue to compete.

However, at international events independent observers would prevent Russian athletes from slipping through the net. That is why the FSB developed a method for covertly removing the caps of tamper evident sample bottles containing the urine (“without any evidence visible to the untrained eye”). This technique was used to replace positive dirty samples during the Sochi Olympic Games and in December 2014 to cover up some dirty samples out of the Moscow Laboratory, which WADA had aimed to confiscate.[19] The McLaren team subsequently found evidence that this sample swapping also occurred after the 2013 IAAF World Championships in respect of positive samples.

The coordinating role of Irina Rodionova in this sample swapping method is remarkable. She was a staff member of the Russian Olympic Committee during the Sochi Games. During the Games, she served as the head of the Monitoring and Management of Medical Anti-doping Programs Department and is currently deputy director of the “Center of Sports Preparation of National Teams of Russia, a subordinate organisation of the Russian Ministry of Sport”.[20] As the report shows, Rodionova would receive and freeze storage samples, which the athletes thought were “clean urine samples outside of the wash out periods for any PEDs they were using”. The investigation’s main informant, Grigory Rodchenkov would test the samples to make sure they were negative. These samples were then secretly transported to the FSB storage freezer, which coincidentally happened to be in the building located next to the Sochi Laboratory.[21]

The actual swapping occurred by passing the A and B bottles through the “mouse hole” located between the “aliquoting room” inside the Sochi Laboratory secure perimeter into an adjacent operations room, outside that secure perimeter. While an FSB officer would take the B bottles somewhere else, the athlete’s stored clean urine would be taken out of the FSB freezer and brought over to the operations room. The FSB officer would return with B sample bottle to the operations room. The B sample bottle’s cap would be removed. The dirty urine would be replaced by clean urine and put in the A and B bottles. Then, the stopper in the A bottle would be replaced and the B bottle cap screwed back on. Ultimately, the bottles would be brought back to the “aliquoting room” via the mouse hole.[22] Subsequently, Rodchenkov had to manipulate the substituted sample to as closely as possible match the “specific gravity” indicated on the original doping control form. He did this by “adding table salt to raise the clean urine SG or distilled water to dilute the clean urine sample so as to closely match the SG number on the DCF”. A laboratory analysis of the salt content of selected samples revealed that six had “salt contents higher than what should be found in urine of a healthy human”.[23] As the Independent Person Report elucidates: “The Sochi sample swapping methodology was a unique situation, required because of the presence of the international community in the Laboratory. It enabled Russian athletes to compete dirty while enjoying certainty that their antidoping samples would be reported clean”.[24]

The Report notes another incident following a WADA request giving notice to the Moscow laboratory of a forthcoming collection of samples stored in the laboratory for further analysis. This resulted in the laboratory quickly destroying thousands of dirty samples that had been collected and reported negative (use of the Disappearing Positive Methodology). Deputy minister Nagornykh then arranged the FSB to fix the problem of the samples collected between 10 September 2014 and 10 December 2014, which could not be destroyed (as a result of the minimal 90-day period of storage following the ISL). When the WADA investigators came to the laboratory, they found sample bottles without their caps and, moreover, that these samples all had negative findings recorded on WADA’s Anti-Doping Management System. Furthermore, forensic examination confirmed tampering and “a urine examination of 3 of the samples showed that the DNA was not that of the athlete involved”.[25] 

Episode 3: The ball is in the IOC’s corner…

In a statement released shortly after Richard McLaren’s press conference, WADA president Craig Reedie conveyed WADA executive committee’s vision on the Independent Person Report. First it condemned the “public speculation made by certain national anti-doping organizations as to the investigation’s outcome in the days leading up to the report’s publication”. More importantly however, it recommended the IOC (and the International Paralympic Committee, IPC) to decline entry for the 2016 Rio Olympic Games to all athletes wishing to compete under the Russian Olympic Committee banner. Moreover, he added that “any exceptional entry of a Russian athlete should be considered by the IOC and IPC for participation under a neutral flag and in accordance with very strict criteria”.

The IOC responded on 19 July by implementing some provisional measures. It decided amongst others: not to organise or give patronage to any sports event or meeting in Russia, not grant any accreditation to any official of the Russian Ministry of Sport or any person implicated in the Independent Person Report for the Rio Games, and “initiate a full inquiry into all Russian athletes who participated in the Olympic Winter Games Sochi 2014 and their coaches, officials and support staff”.

The key question, however, was whether the IOC would follow WADA’s recommendation and decline entries to all athletes under the Russian Olympic Committee banner to the Rio Games. Even though its president Thomas Bach stated that “the findings of the report show a shocking and unprecedented attack on the integrity of sport and on the Olympic Game” and that “the IOC will not hesitate to take the toughest sanctions available against any individual or organisation implicated”[26], it did not actually do so (yet). Instead, it announced that it would carefully evaluate the Independent Person Report and “explore the legal options” weighing a collective ban against the right to compete of individual athletes. Moreover, the IOC was adamant that it would “take the CAS decision of 21 July 2016 concerning the IAAF rules into consideration”.

Episode 4: Now the CAS has ball possession…

Hence, the IOC’s final decision regarding Russia’s participation at this summer’s Olympic Games depended on a large extent on the CAS decision regarding the ROC and 68 Russian athletes’ appeal against the IAAF ban. On 21 July, the CAS Panel confirmed the validity of the IAAF’s decision to suspend the ARAF from participating at the Games as well as the Russian athletes who do not satisfy the conditions set by IAAF Competition Rule 22.1(A).[27] Nonetheless, the CAS expressed its concern about “about the immediate application with retroactive effect of such Rule [IAAF Rule 22.1(A)], implemented by the IAAF on 17 June 2016, providing for exceptional criteria to grant eligibility to athletes whose national federation is suspended. Since such Rule involves criteria based on long-term prior activity, it left no possibility in practice, and as applied, for the Claimant Athletes to be able to try to comply with them.”

Yet, it clearly refused to weigh in directly on the IOC’s pending decision regarding all Russian athletes. Indeed, “since the IOC was not a party in the arbitrations, the CAS found that it had no jurisdiction to determine whether the IOC is entitled generally to accept or refuse the nomination by ROC of Russian track and field athletes to compete at the Rio 2016 Olympic Games”. In other words, the ball is neatly passed back to the IOC, who will now need to make a definite decision on whether Russian athletes, both for athletics and all the other sports, can compete at the upcoming Games or not. As the public pressure is mounting on the IOC, it is now doomed to decide whether to block the entry of all Russian athletes or to leave this decision to the International Federations on a case-by-case basis, like the IAAF has done in the case of athletics. A story to be continued…

Conclusion: Who is to blame for the systemic failures of the World Anti-Doping System?

Russian athletes are currently bearing the brunt of the blame for the State-sponsored doping system in place in Russia, they are being placated in the media and by the World Anti-Doping Agency as cheats, they are being excluded from the Rio Olympics (and potentially many more international competitions), and they are the ones suffering dire economic losses. Yet, are they truly the main responsible for their unenviable fate?

The first key culprit that comes to mind is obviously the Russian State and its political leaders, who have constructed a demonic system imposed on athletes in their young age to ensure that Russia shines on the global sporting scene. They have done so with the implicit (and in the case of the IAAF explicit) support of the international sports governing bodies, which preferred to look away rather than challenge the Russian political clout inside their executive bodies. One has to remember, for example, that Russia’s sports minister Vitaly Mutko, currently decrying the politicization of sport, is a member of FIFA Council (formerly the FIFA Executive Committee).

Furthermore, this is also the failure of WADA. It was supposed to be the independent global gendarme of the world anti-doping fight. Yet, it comes out of these episodes at best as a toothless paper tiger, at worse as a complacent window dresser. A recent piece in the New York Times highlights very well its passive complicity in maintaining the invisibility of the Russian state doping system. WADA is now front and centre in calling for the harshest sanctions on athletes, but for years it has been ignoring the warning signs and refusing to do its homework as far as the implementation of the WADA Code is concerned. It is only because of the public outrage over Hajo Seppelt’s documentary that WADA finally decided to act. What is the Code worth if its implementation at the local level, where it is supposed to apply on a day-to-day basis, is not closely monitored? Only the paper (or the computer code) on which it is written. The general hypocrisy of having a global set of rules, but very little biting enforcement mechanisms underlies the failure of the current world anti-doping system.  

[1] The Independent Commission Report #1, Final Report, 9 November 2015 (Pound report #1).

[2] The Independent Commission Report #2, 14 January, Amended 27 January 2016 .

[3] Pound report #1, p. 10.

[4] Ibid, p. 11.

[5] Ibid.

[6] Ibid.

[7] Pound report #1, p. 12 and 124.

[8] Ibid, p. 9.

[9] Media Release of the CAS of 21 July 2016, Athletics – Olympic Games Rio 2016 - The Court of Arbitration for Sport (CAS) rejects the claims/appeal of the Russian Olympic Committee (ROC)

and of 68 Russian athletes.

[10] Rebecca R. Ruiz and Michael Schwirtz, “Russian Insider Says State-Run Doping Fueled Olympic Gold”, New York Times, 12 May 2016 < http://www.nytimes.com/2016/05/13/sports/russia-doping-sochi-olympics-2014.html > accessed 21 July 2016.

[11] In this regard, it is also worth mentioning that Russia ended first in the medal table with 33 medals, including 13 gold medals.

[12] The Independent Person Report, p. 2.

[13] Ibid, p. 3.

[14] Ibid, p. 4.

[15] Ibid, p. 6.

[16] Ibid, p. 1.

[17] Ibid, p. 10.

[18] Ibid, p. 11.

[19] Ibid, p. 12.

[20] Ibid, p. 13.

[21] Ibid.

[22] Ibid, p. 14.

[23] Ibid, p. 15.

[24] Ibid.

[25] Ibid, p. 17.

[26] Statement of the executive board of the International Olympic Committee of 19 July 2016 on the WADA Independent Person Report.

[27] IAAF Competition Rule reads as follows: “Any athlete, athlete support personnel or other person shall be ineligible for competitions, whether held under these Rules or the rules of an Area or a Member, whose National Federation is currently suspended by the IAAF”.