This week, the Advocate General of the European Court of Justice issued a critical opinion on breaches of contract in football in the Diarra case. If the Court’s judges follow that advice, the legal foundation of the entire transfer system could be removed. Four questions for sports law professor Frank Hendrickx (KU Leuven).
What is the Diarra case about?
Frank Hendrickx: Lassana Diarra terminated his contract with Russian Lokomotiv Moscow in August 2014 because he had to hand in wages. He then negotiated with several clubs, including Sporting Charleroi, where he signed a contract in February 2015. However, Charleroi pulled out when the world football association FIFA would make the club pay for the 10.5 million euros in damages that Diarra had to pay to Moscow for unilaterally terminating his contract. Compensation that was confirmed by the International Tribunal for Sports (TAS). In addition, the Russian Football Association was also not allowed to issue an international transfer certificate for Diarra as long as there was a legal dispute between Diarra and Lokomotiv Moscow.
This situation was the result of Article 17 of the FIFA regulations, the ‘Regulations on the Status and Transfer of Players’. These regulations were introduced after the Bosman judgment (1995) in which the Court of Justice declared the former FIFA transfer regulations invalid.
Because Diarra had lost his contract with Charleroi due to the dispute with his ex-employer and remained unemployed for a long time, his lawyers (who had also argued the Bosman case) demanded compensation from FIFA of six million euros before the court of commerce in Hainaut.
According to his lawyers, Article 17 in the transfer regulations hindered the free movement of workers in the European Union. The case eventually ended up at the Bergen Court of Appeal, which referred the case to the European Court of Justice.
This week, the first Advocate General of the European Court, the Polish magistrate Maciej Szpunar, issued an opinion. A judgment by the Court’s judges will follow later this year. Such advice is not binding, but it is authoritative. The judges usually follow the advice of the attorney generals. This sets important boundaries within which the Court will make its judgment.
What are the main conclusions of the advice?
Frank Hendrickx: In his final conclusion, the Advocate General does not take a final position. He believes that FIFA should put arguments on the table to better justify two matters: the so-called joint and several liability of the new club, which must pay a player’s severance compensation, and the football association’s refusal of a transfer certificate to that club.
In the 87 preceding paragraphs the Advocate General is very critical. In particular for damages in the event of a breach of contract by a player. He finds the ‘price tag’ excessive, even calls it ‘draconian’ – very striking terms – and potentially contrary to European competition law and the free movement of workers.
According to the Advocate General, FIFA cannot hide behind the need for contract stability with its high termination compensation. Not unimportant in that respect is the ruling in the Bernard case of 2010, about training allowances for youth players and their size. The European Court found that clubs could ask for these, but also that they had to be proportionate and limited to the real training costs, not the commercial market value of the youth player. The same reasoning also applies in this case.
CJEU, sports law
Advocate General’s opinion: some FIFA transfer rules may be contrary to EU law pic.twitter.com/sD8qLUsQDe— Steve Peers (@StevePeers) April 30, 2024
Also an important passage in the Advocate General’s Opinion: he believes that Article 15 of the Charter of Fundamental Rights of the European Union should be directly applied to the case, in particular the fundamental right to freely choose and pursue a profession . This is comparable to Article 45 of the European Treaty, which stipulates the free movement of workers. An approach that was also the foundation of the Bosman ruling: employees, in this case football players, should not be commodities.
After the Bosman ruling, FIFA drew up its new transfer regulations, including the famous Article 17, after consultation with the European Commission. The result was that breaches of contracts became impossible or very expensive, and clubs therefore no longer hired players who had fulfilled their contracts. broke.
However, this gave rise to a market practice – which only exists in football, by the way – whereby clubs ‘buy out’ players on the basis of a non-objectifiable, so-called commercial market value. A practice that many clubs admit is vital, because they can only keep their heads above water by – what they call – ‘selling players’. However, these mutual price agreements between clubs disrupt the free movement of workers. And may therefore conflict with European legislation.
Will the European Court of Justice follow the advice?
Frank Hendrickx: The Advocate General emphasized that he did not rush in and analyzed everything thoroughly. The judges of the European Court can go in two directions with their stated considerations. They can limit themselves in their conclusion to assessing the joint and several liability of clubs, and whether football associations can refuse a transfer in the event of such a breach of contract until the dispute between the clubs has been resolved.
However, I expect that the Court will add many elements to this. After all, the way in which the Advocate General has structured his advice is reminiscent of the reasoning in the Bosman judgment. At the time, many thought that the Court would take a mild middle course, but the judgment was much sharper: the transfer system was contrary to European law.
BELGA FILES © BELGA
There is a real chance that the European Court will now complete the circle with an equally far-reaching and clear judgment on players who are still under contract. In particular about the legitimacy of Article 17 of the FIFA regulations on severance payments, and how excessive they are.
Such a judgment would also be in line with the clear guidelines given by the European Court in December 2023 his ruling on the Super League in football. The Court then recognized the monopoly position of the European football association UEFA and the control it can have over a new competition with certain rules and conditions. But it also ruled that this should be done through transparent, objective and non-discriminatory regulations.
The European Court will probably still allow damages for breaking a contract. This is built into every employment law system. In sports, these compensations may even deviate from normal employment law. They must be proportional, based on scales or a lump sum of duration of his contract, with a maximum of 36 months.
What if the European Court follows the advice of the Advocate General with a far-reaching judgment?
Frank Hendrickx: Such a judgment will then have even greater consequences than the Bosman judgment: the entire transfer system, which is currently based on ‘buying out’ players under contract, will be called into question. There is then a real chance that the sky-high transfer fees will disappear.
If it becomes ‘easier’ to break a contract – provided that a proportionate compensation is paid – then the question is whether a club still wants to (or is even allowed to) pay 50 million euros for a footballer. Then a player will not have to wait for negotiations between clubs if he really wants to move to another team. He no longer has to fear a sanction.
If it comes to that, the question is what the most obvious route is. In the football world, a new collective labor agreement (CBA) could be drawn up, for example with the players’ union FIFpro and the European Club Association (the organization that represents all European football clubs, ed.). Based on an earlier ruling in the Albany case from 1999 (about the supplementary pension of employees at that Dutch company, ed.), such a collective labor agreement could even draw up wage and employment conditions that protect the interests of all parties in football. to protect. These might then be tested less strictly against European competition law.
#FIFPROFIFPRO Europe and the French player union @UNFP welcome Advocate General Maciej Szpunar’s opinion in the complaint filed by a French player against a part of FIFA’s transfer regulations. pic.twitter.com/IKh0SvyQS0
— FIFPRO (@FIFPRO) April 30, 2024
The players’ union and the clubs must agree to this. Moreover, the general guidelines must also comply with European law: they must be transparent, non-discriminatory and must not hinder the free movement of workers.
However, such a collective labor agreement would mean a complete change in the football world. After all, the focus of such a regulation lies less with FIFA, but rather with the football clubs themselves and the players’ unions. It is more likely that FIFA will not wait for such negotiations and will sooner adjust its regulations. Perhaps Article 17 will be revised, for example by providing for liquidated damages in the event of breach of contract. Amounts that are more objective, but limited in scope, and that provide more legal certainty to all parties.
It may also be investigated whether FIFA could impose sporting sanctions on breaking a contract, in order to protect contract stability. After all, you can argue that such a breach of contract is anti-competitive. However, a kind of waiting period, a period that must elapse before a player is eligible to play again, will also have to be assessed against free movement.
This already exists in Belgian labor law in the form of a non-compete clause, a prohibition on temporarily taking up employment with a competing employer. However, it is prohibited in sports, at least under the Belgian law of 1978. And this can also be a problem for a closed world such as football. FIFA’s room for maneuver is therefore limited.
Other sports will also follow the European Court’s ruling with great attention, especially if they want to start with a similar model. For example, transfer fees have been around for some time in cycling. But if the transfer system in football is almost completely overhauled, those sports will have difficulty introducing it.
