The “Diarra” Judgement and FIFA Football

TRANSFER REGULATION ON THE TRANSFER OF PLAYERS WITHIN THE EU.  

Written by Salvatore Lamarca, Macchi di Cellere Gangemi

1. Facts and Sporting Rules under Discussion .

The Court’s judgment was issued following a preliminary reference from the Court of Appeal of Mons, Belgium. It concerns the compatibility of certain specific provisions of the “FIFA Regulations on the Status and Transfer of Players” (FFTR) [1] with the provisions of the TFEU on competition and free movement of workers in the internal market. As is known, Article 267 TFEU is an instrument of cooperation between the EU and national courts, aimed at providing the latter with the interpretative criteria of the provisions of the TFEU Treaty for the resolution of disputes which depend in whole or in part on the application of European law.

The ruling originates from a dispute between FIFA and the French footballer concerning the alleged restrictive nature of these rules, which regulated disputes arising between a club and a player in the event of contractual termination before the expiry of the contract, providing for direct and indirect sanctions against the player. Firstly, if the club held the player liable for having unilaterally terminated the contract for just cause, the latter would have had to pay compensation calculated on the basis of the remaining amortization of his contract accounted for by the club. Secondly, the club that subsequently hired the player would have been jointly liable for the payment of such compensation, as well as – in certain cases – liable to sporting sanctions consisting of a ban on hiring new players for the two subsequent transfer market sessions. Finally, pending the dispute, the Federation of the club of origin did not issue the necessary mandatory international transfer certificate (CIT), so that the player could move to a club belonging to another national Federation, effectively blocking the transfer of the player. The failure to grant the CIT was foreseen on the sole basis of the finding of the existence of a dispute between the club and the player regarding the termination of the contract . 

Following the termination of his contract with his original club, Lokomotiv Moscow, the French player Diarra had dedicated himself to finding a new club interested in signing him, but this search had encountered difficulties due to the risk of FIFA application and, in particular, the risk, for said new club, of being jointly condemned to pay the compensation or incurring disciplinary sanctions. In fact, despite having received an offer of employment from the Belgian club Sporting Charleroi, the player had to renounce it, as the conditions for the issuance of the CIT by the original federation did not exist, as the dispute was still pending before the FIFA bodies. Finally, in 2015, the FIFA Dispute Resolution Chamber condemned the player to pay compensation of €10.5 million to Lokomotiv Moscow for breach of contract, and the decision was confirmed on appeal by the CAS. 

Following these events, the footballer brought an action against FIFA and the National Federation before the Belgian Court to obtain compensation for the damage he claimed to have suffered as a result of the application of the FIFA provisions. He argued, in particular, that (i) the application of the rules had infringed his right to free movement within the EU granted to him by the Treaty, preventing him from seeking new employment and from exercising his profession in a Member State other than his home state, and (ii) the provisions constituted an agreement restricting competition.

Following the defeat of FIFA in the first instance, the dispute was transferred to the Court of Appeal of Mons, Belgium. The Belgian judges, in 2022, submitted to the Court of Justice two separate preliminary questions, relating to the compatibility of the FIFA rules in question with Articles 45 TFEU and 101 TFEU.

2. The compatibility assessment.

In answering the questions, the Court expressly clarified the need to proceed with a separate assessment from the point of view of Articles 101 and 45 TFEU. The Court motivated this need by explaining that each of Articles 45 and 101 TFEU pursues its own objective and establishes its own conditions of application and their infringement, if established, does not entail the same consequences. These Treaty provisions can therefore apply simultaneously giving rise to different outcomes, for example compatibility from the point of view of Article 45 TFEU and incompatibility from the point of view of Article 101 TFEU. In both cases, however, the examination had to be conducted taking into account the factual and legal context and the undeniable specificity of the sporting activity [2] . In this way, the Court partly contradicted the conclusions of Advocate General Macey Spunjar, who had noted that both provisions of the Treaty, although addressed to different subjects, were based on the pursuit and protection of the internal market, and had warned of the risks to legal certainty of a double application of the two provisions to the same cases.

Following the examination, the Court first established that the articles of the FFTR Regulation taken into consideration were incompatible with Article 45 TFEU as they constituted a clear obstacle to the free movement of footballers within the EU market. In fact, the application of the rules prevented a footballer from transferring to a new club on the simple basis of the existence of a dispute with his club of origin. The financial, disciplinary and sporting risks that the rules created for the player himself and for the destination club were in fact insurmountable for the purposes of the transfer.  

The Court recognized that such sporting rules could be justified by the sporting objective of ensuring the stability of contracts between players and clubs and therefore, of the “squads” that constituted the pool for the teams that clubs fielded in football competitions. Therefore, such rules were, indirectly, aimed at the regularity of professional football competitions based on merit, an objective recognized as worthy of protection by EU law. On the other hand, the sanctioning provisions of the rules appeared manifestly disproportionate to this objective also by virtue of their imbalance in favor of the interests of football clubs and therefore the derogation from the prohibition provided for by Article 45 TFEU could not apply. 

Secondly, in assessing the FIFA provisions under competition law, the Court concluded that they constituted a decision by an association of undertakings which infringed Article 101 TFEU “by object”. Agreeing with the conclusions of Advocate General Macej Spunjar, it held that they constituted a serious restriction of competition between professional football clubs in the recruitment of talented players, an activity which constitutes one of the most relevant competitive parameters on professional football markets. From a competitive point of view, they had the objective of making it extremely difficult to recruit players who were no longer under contract with a competing club, but whose contract had allegedly been terminated without just cause by the player himself: they thus blocked competition between professional clubs in the acquisition of players. Having regard to the assessment of the legal and factual economic context within which the agreement was situated, the Court provided some preliminary considerations regarding the possible justification of the regulatory provisions in light of the specificity of the “product” that sports competitions between professional clubs constitute from an economic point of view, as already stated in the judgments of December 2023. [3] A FIFA regulation regulating the conditions under which professional football clubs can compose the teams participating in the competitions can be considered legitimate, ensuring to a certain extent, the stability of the composition of the rosters. This was the case of the prohibition of unilateral termination of employment contracts during a season, or even in a given year provided for by Article 16 FFTR.

Conversely, the specificity of football does not justify “ a general, drastic or permanent prohibition of any freedom to unilaterally recruit players already engaged by another club established in another Member State, or players whose employment contract has allegedly been terminated without just cause ” [4] . According to the Court, the rules in question, enacted under the pretext of preventing aggressive “poaching” of footballers by richer clubs, were in reality non-solicitation agreements which lead to an artificial compartmentalisation of the markets, both national and local, “ to the advantage of all football clubs ”. The classic mechanisms of contract law, which provide for the club’s right to receive compensation in the event of a player’s failure to perform (if necessary, even at the initiative of another football club) must be considered sufficient to guarantee the long-term presence of that player in the club, in accordance with the agreements reached. They also guarantee “the functioning of the rules of the market between football clubs, which allow clubs to proceed with the signing of the player” at the end of the normal duration of the contract or before, in the event of the conclusion of an economic agreement between the transferor and the transferee club” [5] .

It is important to note that, since the rules constituted a serious infringement of competition “by object”, the Court (pursuant to Article 101 TFEU) did not proceed to an analysis of the effects. It was therefore precluded from examining the effects produced on the basis of the more favourable criteria provided for by Wouters and Meca Medina. Such an examination could have been carried out in the light of the legitimacy of the sporting objectives pursued by the FFTR rules, as well as the proportionate nature of the measures envisaged to achieve those objectives. In particular, the possible compatibility of the rules with their objective of ensuring compliance with the principle of merit and the regularity of sporting competitions, through the maintenance of the stability of contracts between clubs and players, could not be assessed under the competition rules. Finally, the Court considered prima facie that the rules did not merit an individual exemption, since, “at first sight”, the requirement of the indispensability of the restrictions in order to achieve possible efficiency gains was not satisfied (Article 101 par. 3). 

3. Critical Considerations.

It is appropriate, first of all, to ask whether the Diarra ruling calls into question the compatibility of the provisions on contractual stability set out in Articles 13 and 16 of the FFTR and the transfer system itself, or whether it simply decrees the prohibition of the individual, specific provisions submitted to the examination of the Court of national judges of the reference – which, as examined, provided for particularly penalising consequences for the player in the event of termination of the contract without just cause. 

It is possible to respond with a certain degree of certainty that the judgment, although particularly severe in its assessment of the disputed provisions (in particular Article 17 FFTR), does not formulate a general judgment of incompatibility of the entire transfer system. First of all, the general principle on which the FFTR is based, which provides that contracts between clubs and players are concluded for a fixed period and cannot be unilaterally terminated by one of the parties in the absence of just cause, does not appear to be expressly contested. Indeed, point 145 of the Judgment, cited above, seems to confirm the legitimacy of this principle. Furthermore, the Court reiterates that the specificity of sport and the economic context in which professional football is situated can justify rules on transfers that guarantee the objective of guaranteeing contractual stability and, in this way, the regularity of competitions, provided that this system is coherent, balanced and proportionate in order to pursue these objectives.

Finally, it should be added that a generalised assessment of incompatibility of the transfer system under the rules on free movement would need to be explained in detail, as it would raise the issue of a conflict with the previous case law of the Court established in the Barnard ruling. This ruling had assessed as lawful a transfer system within which compensations were provided for, allocating a portion of the price paid on the occasion of subsequent transfer operations to the clubs that had borne the costs of training the player. This compensation had to be calculated according to objective and determinable criteria.

The second part of the reasoning on competition, however, formulates some considerations that appear to be more critical of the system. The competitive preclusion that would derive from rules that prevent or make it more difficult for a club to acquire the services of players already under contract with another professional club is highlighted several times. The statement that the players already signed would constitute the “ majority of the resources available to the clubs compared to the total number of players ” appears particularly controversial; in the absence of the controversial rules, according to what the ruling states, there could be greater competition in the recruitment of players already signed by their respective clubs. However, it is not possible to deduce from these passages that the competition between clubs in the procurement of resources constituted by the players could take place legitimately in violation of the rules in force within FIFA, especially by authorizing the player to unilaterally terminate without cause the contractual commitments undertaken. In fact, with respect to these statements, it could be objected that, at present, there is already competition between clubs in the acquisition of talented players, which takes place albeit in compliance with the current rules, that is to say (1) through consensual transfers negotiated between clubs, as regards players under contract or (2) directly with the player, upon expiry of the contract. From a further point of view, the judgment does not satisfactorily explain to what extent competition between clubs is distorted, given that the FFTR rules apply in an identical and uniform manner to all professional clubs: these rules, uniformly applied, aim to maintain a certain sporting balance of competitions in accordance with the European sporting model, repeatedly supported by the EU institutions. This is how the Commission seemed to have expressed itself during the proceedings [6] , stating that the restriction of competition resulting from the disputed rules should be understood as “by effect” and not “by object”. The Commission had in fact argued that these rules were applicable only in the specific case of termination of the contract without just cause and “ therefore have no impact on the possibility for clubs to compete freely by engaging players both at the expiry of the contract binding them to their previous club and during the validity of that contract, provided that such an engagement is agreed upon by all interested parties and complies with the various temporal and substantive rules that govern the registration of players”. At the same time, the judgment seems to safeguard, in general terms, the lawfulness of the current contractual and transfer system, where it considers that the traditional contractual rules are sufficient to guarantee “ the normal functioning of the rules of the market between companies, which allow the latter, at the end of the normal duration of the contract, or before, in the event of the conclusion of a financial agreement between companies, to proceed with the engagement of that player [7] “.

4. Conclusions From reading the judgment, – although the interpretation of some passages is not entirely linear – it can be concluded with reasonable certainty that the assessment of incompatibility is addressed to the individual and specific provisions that are the subject of the preliminary reference. The general principles of the FFTR Regulation do not constitute, in themselves, a preclusion to competition and, on the other hand, the limitations placed on the free movement of players deriving from the general principles on which the transfer system is based can be justified, – if proportionate – by the needs, specific to sports markets, to guarantee a certain contractual stability, and therefore to regular competitions based on sporting merit: these needs constitute objectives worthy of protection from the point of view of the TFEU Treaty. On the other hand, it should be underlined that the Court, once again, clarifies that the rules that govern the relationships between sports organizations and their affiliates must be characterized by transparency and, therefore, in all their aspects, predetermined, so that they can be applied on a case-by-case basis on the basis of objective and uniform criteria. In this sense, it is foreseeable that the international football organization will revise the current rules by regulating in a more detailed manner the cases provided for by Article 17 of the FFTR [8] , in cooperation with the representatives of the parties involved. However, the judgment does not appear to be entirely coherent in assessing the rules under the respective profiles of fundamental freedoms and competition, thus leaving some margins of uncertainty for the referring judge. An assessment of the competitive restrictions under the profile of the effects produced – and not as a violation by object – would have made possible a homogeneous analysis of the FFTR rules, on the basis of the TFEU rules on competition and the internal market, under the profile of the legitimacy of the objectives pursued and the proportionality of the instruments in pursuing such objectives.

[1] The third version of the FIFA Regulations on the Status and Transfer of Players, dated June 2024, can be found on the FIFA website https://digitalhub.fifa.com/m/69b5c4c7121b58d2/original/Regulations-on-the-Status-and-Transfer-of-Players-June-2024-edition.pdf

[2] Echoing what had already been stated in the Superlega judgment (C-333/21, EU:C:2023:1011, paragraphs 103 and 104, 105), the Court stressed that the specific nature of sport can only be taken into account within the framework and in compliance with the conditions of application provided for by the Treaty rules. In particular, when it is argued that a rule adopted by a sports association constitutes an obstacle to the free movement of workers or an anti-competitive agreement, the qualification of that rule as an obstacle or as an anti-competitive agreement must, in any event, be based on a specific examination of the content of that rule in the context in which it is to be implemented.

[3] Referring to the case law recently produced by the Grand Chamber, the Sentence recalled that the federations in charge of a sporting discipline are entitled to adopt rules relating to the organisation of competitions, their correct running and the participation of athletes in such competitions. Therefore, it is legitimate for FIFA to adopt common rules aimed at ensuring the homogeneity and coordination of international competitions within an annual or seasonal calendar, in order to promote the running of sporting competitions based on equal opportunities and merit. 

[4] The Advocate General notes in this regard in point 53 of his Opinion that Article 17 of the Regulation, Article 9.1 thereof and Article 8.2, paragraph 7, of Annex 3 to the Regulation, having regard to their wording, their economic and legal context and the objective aim which they pursue, have precisely as their object and, in any event, as their actual and potential effect, the imposition on all ‘undertakings’, which from an economic point of view the professional football clubs affiliated to the national football associations which are members of FIFA constitute, a set of conditions which are so prohibitive and dissuasive, in order to secure the services of top-level footballers who are no longer under contract with a competing club, but whose contract has allegedly been terminated without just cause, that the conditions in question must be considered to excessively limit or ‘block’, from a legal and practical point of view, the possibility for those clubs to compete in this way. Such a limitation is all the more significant as it concerns an element which, according to legal and economic doctrine, constitutes one of the main parameters through which clubs can compete with each other, given that the hiring of footballers is itself linked to the organisation and broadcasting of football competitions between clubs. Furthermore, the rules in question limit, in the same way and to the same extent, the possibility for footballers themselves to compete with each other.

[5] Ibidem, point 145.

[6] Reference is made in particular to point 50 of the Advocate General’s Opinion which summarises the Commission’s position.

[7] Point 145 of the Judgment.

[8] In this sense, the FIFA press release available on the organisation’s website https://inside.fifa.com/legal/football-regulatory/news/fifa-to-open-global-dialogue-on-article-17-of-the-regulations-on-the-status-and-transfer-of-players