CJEU rules that FIFA transfer rules infringed EU competition law

The CJEU said (link in French) the rules also impede the freedom of movement of professional footballers wanting to work for a new club.

Paul Williams, competition law expert at Pinsent Masons, said: “The CJEU’s findings that particular FIFA transfer rules amounted to ‘by object’ infringement of EU competition law and resembled ‘non-poaching’ agreements add to a growing body of CJEU case law about competition law issues involving sport governing bodies and their rules, particularly football.”

FIFA’s current transfer regulations place a burden on both football clubs and football players with unpredictable and disproportionate financial and sporting risks, the CJEU said. Although some rules could, in principle, be justified by on the basis that they seek to ensure a certain degree of stability of football teams and the sporting competition, the CJEU found that they are generally too far-reaching and go beyond that aim.

The current FIFA rules provide that a football player terminating their contract with a club prematurely without just cause must compensate the club. If the player joins a new club, both the player and their new club must compensate the former club. Additionally, the new club can be subject to a sporting sanction under certain circumstances, and be banned from registering any new players for a given period during which their new recruit cannot participate in football competitions.

In 2013, former France international player Lassana Diarra signed a four-year contract with the Russian professional football club Lokomotiv Moscow. One year later Diarra terminated the contract due to a reduction in salary. After Lokomotiv Moscow sued Diara for breach of contract, FIFA ordered Diarra to pay that club compensation totalling €10.5 million. The decision was based on article 17(1) of the FIFA Regulations on the Status and Transfer of Players (RSTP), which provides that a player seeking early termination of their employment contract, unilaterally and “without just cause”, must pay compensation to their former football club.

According to Diarra, the compensation ruling made it difficult for him to find a new club because any new football club that hired him before the term of his employment with Lokomotiv Moscow ended would be jointly and severally liable to compensate Lokomotive Moscow. As a result, a contract with the Belgian club Sporting Charleroi failed to materialise.

Diarra sued FIFA and the Belgian Football Association for damages and loss of earnings. The claim amounted to €6m. The Belgian court referred the case to the CJEU for a preliminary ruling on two points of EU law: competition law, and freedom of movement.

The CJEU held that certain provisions of the RSTPs violated both EU competition law and EU freedom of movement rules.

When assessing the relevant RSTP provisions under EU competition law, the CJEU found that “under the guise of preventing aggressive recruitment practices”, the FIFA transfer rules “correspond, in fact, to non-poaching agreements between clubs which, in essence, result in artificially partitioning the national and local markets”.

In the CJEU’s view, FIFA's rules went beyond what was necessary in the interests of providing stability for football clubs and the sporting competition. The court said that the RSTPs created for athletes and clubs seeking to recruit players mid-contract “unforeseeable and potentially very high financial risks as well as major sporting risks […] which, taken together, are such as to impede international transfers of those players”.

The court noted that the RSTPs “even if they are presented as aiming to prevent practices of poaching players by clubs with greater financial resources, are comparable to a general, absolute and permanent ban on the unilateral recruitment of players already signed, imposed by decision of an association of companies on all companies that are professional football clubs and weighing on all workers that are these players.”

According to media reports, in response to the CJEU ruling FIFA said that the judgment confirms the legality of the general principles of the transfer system, as only two articles of RSTPs were criticised by the court. FIFA has also said that it sees the CJEU judgment “as an opportunity to keep modernising its regulatory framework” and that it “will formally invite stakeholders to comment” on its proposals for amending its RSTPs.

The Belgian court will now have to determine the substantive the case, in light of the of CJEU’s judgment.

“These developments may lead to further competition law complaints or legal challenges by football players or player associations,” Williams said.  “For example, on 14 October, football player unions and leagues filed a competition law complaint with the European Commission over FIFA’s imposition of the international match calendar.”

In the UK, competition law arguments were also raised in a recent legal challenge brought by Manchester City Football Club against the Premier League.