In a long-awaited CJEU judgment (LINK) in the “Diarra Case” which I presented in an earlier post (LINK), the European Union’s top court (CJEU) said that certain FIFA rules on players’ transfers are contrary to EU legislation relating to competition and freedom of movement.
Going through a judgment issued by the CJEU offers some interesting insights.
The court concluded that (i) the rules for setting the amount of compensation owed by any player to their former club in the event of termination of an employment contract without just cause, (ii) the rule that any new club that signs such a player is jointly and severally liable for the payment of that compensation and (iii) the presumption of incitement to terminate the employment contract and the sanction of a ban on registering new players that are applicable to new clubs, have the effect of imposing on those clubs significant legal, financial and sporting risks, which, taken together, are clearly to dissuade clubs from signing such players.
These rules further apply specifically in the event of cross-border movement of players, to the exclusion of any movement within a single state, and are thus likely to hinder the freedom of movement of workers.
Under the established case law, rules which hinder freedom of movement can be allowed, if it is established that their adoption pursues a legitimate objective of general interest compatible with that EU treaty and that they are proportionate.
Although the CJEU left the specific assessment of such exemption to the Belgian court which asked a preliminary question, it provided certain guidelines as to this question, and its considerations will bring headaches for FIFA (and its lawyers).
First, the CJEU noted that the compensation criteria appear to be intended more to protect the financial interests of clubs in the economic context specific to player transfers between them than to ensure the supposed smooth running of sporting competitions.
Also, the rule under which the new club is presumed to have incited the player to a breach of contract without just cause and therefore liable to a sporting sanction consisting of a general ban on registering new players clearly appears to be devoid of any relationship of proportionality with the breach attributed to the new club concerned.
Last not least, the CJEU also lacked the proportionality in case of the prohibition of the former association from issuing an ITC if the former club and the player are opposed by a contractual dispute linked to a lack of mutual agreement on premature termination of the employment contract, as it ignores the circumstances specific to each individual case. The CJEU concluded that such prohibition cannot be justified by an alleged desire to ensure the smooth running of sporting competitions.
The wording of certain parts of the judgment are very harsh, such as the part where the CJEU states that the rules correspond to non-poaching agreements between clubs which, in essence, result in artificially partitioning the national and local markets, to the benefit of all clubs. As such, they constitute a clear restriction on competition.
It is premature to assess the impact of this fresh CJEU judgment on FIFA’s current mechanism of enforcing player contracts via rules around registrations and the deterrent effect of the acquiring clubs being jointly and severally liable to pay compensation. However, it is not difficult to imagine that, as a result, football will see more players terminating their contracts prematurely in order to pursue lucrative transfer opportunities, which could ultimately change the balance of power between clubs and players.
