FIFA’s freshly adopted TPO ban entered into force on 1 May (see our Blog symposium). Though it is difficult to anticipate to what extent FIFA will be able to enforce the ban, it is likely that many of the third-party investors will try to have recourse to alternative solutions to pursue their commercial involvement in the football transfer market. One potential way to circumvent the FIFA ban is to use the proxy of what has been coined “bridge transfers”. A bridge transfer occurs when a club is used as an intermediary bridge in the transfer of a player from one club to another. The fictitious passage through this club is used to circumscribe, for example, the payment of training compensation or to whitewash a third-party ownership by transforming it into a classical employment relationship. This is a legal construction that has gained currency especially in South American football, but not only. On 5 May 2015, in the Racing Club v. FIFA case, the Court of Arbitration for Sport (CAS) rendered its first award involving directly a bridge transfer. As this practice could become prevalent in the coming years we think that this case deserves a close look.

I. Facts and procedure

Fernando Ortiz is an Argentine professional football player who entered into an employment contract with Vélez Sarsfield, valid until 30 June 2012. After the expiration of the contract, Ortiz signed an employment contract with the Uruguayan team, Institución Atlética Sud América on 11 July 2012, valid until 30 June 2017. Institución was playing in the Second Division in Uruguay at that time. A week later, on 20 July 2012, Ortiz was transferred from Institución back to Argentina. Institución and Racing Club, Ortiz’ new club, agreed a transfer fee (which was not disclosed). The first instalment should be made before 24 July 2012. Ortiz’ new employment contract was valid until 30 June 2014. Both transfers were duly registered in the FIFA Transfer Matching System (TMS). First, on 23 July 2012, the Argentine Federation (AFA) provided the Uruguayan Federation (AUF) the International Transfer Certificate (ITC). After the transfer from Institución to Racing, the AUF sent the same paperwork to the AFA on 3 August 2012. At that time, no payments were made.

Meanwhile, in view of the number of similar transfers, AFA and the Argentine Tax Authorities agreed that the players concerned would not be allowed to play in the Argentine league. This resulted in the parties (Institución, Ortiz and Racing) concluding a Rescission Agreement of the transfer contract, stating that they had “nothing to claim from each other”.[1] This agreement was not uploaded at that time in the TMS. On 23 November 2012, the FIFA TMS body sent a letter[2] to Racing asserting that they were not aware of any proof of payment of the transfer fee, and that this transfer could constitute an infringement of the TMS rules. Racing replied[3] by enclosing the rescission agreement and confirming that no payments were to be made. On June 2013, FIFA TMS opened disciplinary proceedings against Racing, claiming a violation of articles 3 and 9.1 of Annexe 3 RSTP[AD1] . In response Racing blamed Ortiz for trying to benefit himself from such operation and argued that the club had a true sporting interest in signing Ortiz and did not receive any economic benefit out of the transfer. On 14 August 2013, the FIFA TMS body submitted the disciplinary proceeding to the FIFA Disciplinary Committee (FIFA DC) for a proper investigation of the facts.

In its decision of 5 March 2014, the FIFA DC analysed the two transfers and concluded that they lacked a sporting objective. Even if, from a formal point of view, the first of the two transfers did not involve Racing directly, the FIFA DC considered, taking into account the chronological unfolding of the transfers, that the transfer of Ortiz to Institución would not make sense (according to the playing level of Institución and Ortiz), if his subsequent transfer to another club, in this case Racing Club, was not already planned. Accordingly, the FIFA DC found that the two “parts of the operation” cannot be considered separate. Hence, the whole bridge transfer scheme was deemed known to all parties involved. Thus, the FIFA DC concluded that Racing was involved in the operations carried out and therefore liable to face sanctions.[4]

Moreover, the FIFA DC drew attention to the effects the rescission agreement should have had in a rational context. Indeed, in a normal constellation, one would have expected Ortiz to return to Institución, instead the fact that he stayed on to play at Racing corroborated the non-sporting interest of the transfer. The FIFA DC considered that the aim of the TMS rules is to create transparency (Article 1 Annexe 3 RSTP) in players’ international transfers. In the view of the FIFA DC, Racing, however, used the TMS fraudulently to give a sporting appearance to such a transfer. Therefore, Racing is found to have infringed Articles 3(1)[5] and 9.1(2)[6] Annexe 3 FIFA RSTP, since the transfer was conducted through the TMS for illegitimate purposes and it did not act in good faith. As a consequence of this infringement, the Argentine club was fined CHF 15,000 and warned in accordance with the FIFA Disciplinary Code.[7] In the same proceedings, the Uruguayan club was sanctioned with a transfer ban for two complete and consecutive transfer periods and a fine of CHF 40,000.

Racing Club decided to appeal the decision to the CAS. The Argentine club based its appeal[8] on the grounds that there is no legal basis in the FIFA Regulations to sanction the club for correctly registering a transfer without a sporting reason in the FIFA TMS system.  

II. Commentary

First, we need to explicate in greater details the functioning and purposes of bridge transfers. Before, tackling the substance of the award rendered by the CAS.

A.    What is a bridge transfer?

As explained by Ariel Reck[9] (who was Racing’s lawyer in the present case), a bridge transfer has three main characteristics:

• A bridge transfer is made for no apparent sporting reason, there is a non-sporting purpose underlying the move.

• Secondly, there are three clubs involved in this triangular structure: on the one hand the club where the player was firstly registered (club of origin); secondly, the so-called ‘bridge club’, which will usually be a club of a lower level than the player involved and the final club of destination, i.e. the club where the player was intended to play for from the beginning. The lack of balance between the player and the bridge club is usually evident.

• The last feature is the short period of time that the player is engaged with the bridge club. Frequently, such a player does not play any game at all with this club.

There are three important reasons why football clubs enter into a triangular agreement that constitutes a bridge transfer:

1. The bridge transfer helps to reduce the cost of training compensation or payments to be made under FIFA’s solidarity contribution mechanism.

2. The bridge transfer allows the use of a club to circumvent the FIFA rule that prohibits TPO.[10]

3. The bridge transfer is used to evade taxes.

1.   Reducing training compensation

As far as the reduction of the value of the training compensation is concerned, it should be noted that there is already an award dealing with this matter, though without making an explicit reference to the notion of “bridge transfer”. In 2009, CAS rendered an award in a dispute between MTK Budapest and FC Internazionale. In this case, Inter was interested in signing a Hungarian player from MTK Budapest. After negotiations between the two clubs broke down, the player entered into a professional contract with a Maltese club. Yet, after nine days at the Maltese club, the player was transferred to Inter. According to the FIFA’s training compensation rules[11], if the player would have been transferred directly from MTK Budapest to the Italian club, the payable amount to the Hungarian team, for the three seasons that the player was trained by MTK Budapest, would have been €160,000.[12] The Panel, found this transfer to be irrational and considered that the training efforts of MTK Budapest should in any case be rewarded. Therefore, it decided that Inter should pay a training compensation to the Hungarian team.

On the other hand, by means of a comparable manoeuvre, the solidarity mechanism can also be manipulated. The RSTP provisions on the solidarity mechanism are only applicable to international transfers (Article 1(1) RSTP). The transfers between two clubs of the same association are “governed by specific regulations issued by the association concerned” (Article 1(2) RSTP). Thus, one can reduce the amount of the solidarity contribution via a bridge construction. The first (international) transfer is concluded for a low amount, which would be subject to the solidarity contribution. Later, a second (national) transfer is concluded for the real amount.[13]

2.   Circumventing the FIFA TPO ban

Another purpose for the use of bridge transfers is to circumvent the FIFA rules prohibiting agents (or intermediaries) or other third parties to acquire economic rights from players. This is “a way to anchor a players economic rights to a club”[14] instead of a mere third party (agent or a company). By controlling a club, the former third-party owners are able to continue investing in players while making sure that this investment is at least formally in conformity with the RSTP. With this mechanism, a third party, who controls a club (a bridge club), also enjoys the legal protection awarded by the FIFA RSTP to clubs, for example, in case of breach of the contract without just cause (17 RSTP).

 3.   Reducing Taxes

Bridge transfers are also designed to reduce taxes or hide the financial beneficiary of the amounts.[15] Bridge clubs, in these cases, are based in “tax heavens”. Consequently, two transfers need to be concluded: One from the team of origin to the bridge club, and the other one from the bridge club to the club of destination. If the bridge transfer is made with the sole purpose of reducing taxes, the fee for the first transfer would be low because this transfer fee is highly taxed. The second transfer would be concluded for a higher amount and the fee will be taxed at a low rate.

Secondly, a bridge transfer could also be used to disguise a compensation for a player (this mechanism is generally used by free agents) or payments to third parties. Usually, players who move to a new club as free agents tend to receive higher salaries than players who have been transferred to another club while still on a contract with their old club. In order to prevent the payment of high income taxes, a player and a bridge club agree to share the transfer payment made by the club of destination. Thus, the bridge club is rewarded for taking part in the bridge transfer; this reward is usually limited to a small share of the total transfer sum.[16]

The third alternative is the configuration at play in the Racing case. In Uruguay, clubs are considered cultural institutions and according to the Article 69 ‘Constitución Nacional’ (National Constitution), they are exempted from paying taxes, even on transfers of players. The clubs take the legal form of either ‘Sports Association’ or ‘Sociedad Anónima Deportiva’ (Public limited sports company), the latter being considered a cultural institution as well. A recent Uruguayan judgment[17] extended the tax exemption to the ‘Socidades Anónimas Deportivas’. However, since bridge transfers have no sporting interest and are aimed at an economic profit derived from reducing the tax burden, the Uruguayan court also held that bridge transfers are not to be tax exempted.  

B.    The Racing case: FIFA’s interpretative bridge too far

1.     The argument of the parties

Racing Club argued in front of CAS that neither Article 3(1), nor Article 9.1(2) of Annexe 3 FIFA RSTP could constitute a sufficient legal basis to impose sanctions in case of a bridge transfer. Basically, “neither the Regulations nor the TMS generates a new substantive law”.[18] No provision states that transfers with a purely economic purpose violate any FIFA provision, which “precludes any sanction based on such concept”.[19] Racing Club also pleaded the ‘principle of estoppel’. As neither FIFA nor the FIFA TMS have sanctioned bridge transfers in the past, Racing Club is of the opinion that the FIFA DC is estopped from sanctioning them in the case at hand.

FIFA recognises that “although (the FIFA regulations) are not applicable to the present matter, (they) present an unambiguous view of what falls within the scope of the Regulations in general terms”.[20] The body argues that this loophole might be covered by the association’s usual practice or, if not, by the rules that they would lay down if they were acting as legislators. Also, FIFA argues that the FIFA Disciplinary Code (FDC) has to be read in accordance with the language used, the grammar and syntax of the provisions, the historical background and the regulatory context. In other words, FIFA pleads that the Panel must sanction the club interpreting the FIFA rules by analogy, if the wording of articles 76 FDC[21] and 62 FIFA Statutes[22] in connection with the TMS rules invoked is not sufficient to ground the decision of the FIFA DC.

2.     The decision of the Panel

In the view of the Panel, the FIFA DC was competent to render a decision in this matter. However, this decision must be grounded on a legal basis found in the FIFA regulations. The key question in the present case is whether Articles 3(1) and 9.1(2) Annexe 3 FIFA RSTP can constitute such a legal basis.

Therefore, taking into account that Racing was sanctioned for having violated the provisions of Annexe 3 by having entered untrue or false data and/or having misused the TMS for illegitimate purposes in bad faith by concluding a “bridge transfer”, the Panel must decide whether the transfer breached these provisions, and if it did so, whether the sanction is proportionate according the TMS rules.

The Panel considers that it is “undisputed that the present case involves a transfer structure which, […], is to be considered as a “bridge transfer”.[23] The Panel considers that Racing Club could not ignore that it was involved in a bridge transfer and was not acting in good faith when arguing that the transfer via Institución was conducted exclusively on the basis of a sporting interest. However, this does not imply per se that Racing acted in bad faith as far as the TMS registration of the Player’s transfer from Institución to Racing is concerned.[24] Indeed, FIFA had to satisfy its burden of proof and demonstrate to the comfortable satisfaction of the Panel that Racing Club had entered untrue or false data and/or misused the TMS for illegitimate purposes. In this regard, the Panel finds that “insufficient evidence is available to prove that the Appellant must be assumed not to have acted in good faith in connection with Player’s transfer registration in the TMS”, as “it has not been proven that the Appellant has registered misleading or false information in the TMS”.[25]

If FIFA is to outlaw the recourse to bridge transfers it must do so in an express fashion. In other words, “the parties involved, in conformity with the principle of legality, shall be provided with specific guidelines in order to know how to act when international transfers of players take place”.[26] Critically, “the lack of such clear and specific set of rules does not justify, in the eyes of the Panel, the “secondary use” of the TMS rules for these purposes”[27]. The principle of legality implies that a sanction must be based on a previously existing legal rule. The CAS had emphasized this principle at various instances in its earlier jurisprudence.[28] Consequently, the Panel found that the “bridge interpretation” used by the FIFA DC to sanction Racing for taking part in a transfer construct qualified as a bridge transfer was going too far and could not be followed. In short, “the current TMS rules represent neither an appropriate nor an effective tool for combating and/or sanctioning bridge transfers”.[29] Hence, the arbitrators decided to reduce the sanction imposed to a mere reprimand.

This is not to say that the Panel endorses the recourse to bridge transfers. Instead, it clearly states that it “concurs entirely with the Respondent (FIFA) that measures should be applied against bridge transfers when such transfers are conducted for the purpose of engaging in unlawful practices, such as tax evasion, or to circumvent the rules concerning, for instance, the payment of training compensation or solidarity contributions, or to assure third party's anonymity in relation to the relevant authorities”.[30]

Yet, the basic rule of law principle requiring that FIFA must first devised clearly positivized rules on the basis of which it can then adopt the required sanctions must be respected. This is a bold move by the Panel in light of the bad reputation of bridge transfers. FIFA, as any public or private authority, cannot free itself from the duty of acting in the framework of the regulations it has adopted. The decision is an important reminder of the limits faced by the discretionary power of International Sports Governing Bodies when CAS Panels review their disciplinary decisions. These Bodies do not have an absolute discretion to exercise the disciplinary power that they derive from their statutes. This power is checked by reference to the same legal principles restricting State power in a national context. Thus, it is the duty of FIFA to make sure that it disposes of an appropriate legal basis to act. Consequently, in the (near) future, instead of jumping an interpretative bridge too far, it is advisable that FIFA adopts specific rules to tackle the potential ethical and legal challenges posed by the surging use of bridge transfers.

[1] CAS 2014/A/3536 Racing Club Asociación Civil v. FIFA, paragraph 2.9

[2] Ibid, paragraph 2.10

[3] Ibid, paragraph 2.13

[4] Ibid, paragraph 2.19

[5] “All users shall act in good faith.”

[6] “Sanctions may also be imposed on any association or club found to have entered untrue or false data into the system or for having misused TMS for illegitimate purposes.”

[7] Articles 10.c) and 15 for the fine and Articles 10.a) and 13 for the warning.

[8] CAS 2014/A/3536 Racing Club Asociación Civil v. FIFA, paragraph 7.2.2

[9] World Sports Law Report – April 2014, by Ariel Reck.

[10] CAS 2014/A/3536 Racing Club Asociación Civil v. FIFA, paragraph 7.3.2(o)

[11] Article 20 and Annexe 4 FIFA Regulations on the Status and Transfer of Players.

[12] CAS 2009/A/1757 MTK Budapest v. Internazionale Milano, paragraph 24.

[13] Ariel Reck, “What is a ‘bridge transfer’ in football”.

[14] Ibid.

[15] Ibid.

[16] “El otro triángulo de las Bermudas: los pases fantasmas a Uruguay y Chile”, 18 August 2012, Perfil.com

[17] Tribunal Contencioso Administrativo (Uruguay), fallo no. 301, 16 abril 2015.

[18] CAS 2014/A/3536 Racing Club Asociación Civil v. FIFA, paragraph 7.2.2.d)

[19] Ibid.

[20] CAS 2014/A/3536 Racing Club Asociación Civil v. FIFA, paragraph 7.3.2.k)

[21] “The FIFA Disciplinary Committee is authorised to sanction any breach of FIFA regulations which does not come under the jurisdiction of another body.”

[22] “1.The function of the Disciplinary Committee shall be governed by the FIFA Disciplinary Code. The committee shall pass decisions only when at least three members are present. In certain cases, the chairman may rule alone. 2. The Disciplinary Committee may pronounce the sanctions described in these Statutes and the FIFA Disciplinary Code on Members, Clubs, Officials, Players, intermediaries and licensed match agents. 3. These provisions are subject to the disciplinary powers of the Congress and Executive Committee with regard to the suspension and expulsion of Members. 4. The Executive Committee shall issue the FIFA Disciplinary Code.”

[23] Ibid, para.9.11

[24] Ibid, par. 9.14

[25] Ibid, para.9.15

[26] Ibid, par. 9.18

[27] Ibid.

[28] "In the Panel’s opinion, this provision of the Olympic Charter is to be properly read in accordance with the “principle of legality” (“principe de légalité” in French), requiring that the offences and the sanctions be clearly and previously defined by the law and precluding the “adjustment” of existing rules to apply them to situations or behaviours that the legislator did not clearly intend to penalize. CAS arbitrators have drawn inspiration from this general principle of law in reference to sports disciplinary issues, and have formulated and applied what has been termed as “predictability test”. Indeed, CAS awards have consistently held that sports organizations cannot impose sanctions without a proper legal or regulatory basis and that such sanctions must be predictable. In other words, offences and sanctions must be provided by clear rules enacted beforehand." CAS 2008/A/1545 Andrea Anderson, LaTasha Colander Clark, Jearl Miles-

Clark, Torri Edwards, Chryste Gaines, Monique Hennagan, Passion Richardson v. International Olympic Committee (IOC), award of 16 July 2010, para.30. See also CAS 2011/A/2670 Masar Omeragik v. Macedonian Football Federation (FFM),  award of 25 January 2013, para.8.13.

[29] Ibid. Para.9.19

[30] Ibid, para.913

The European Commission’s decisions of 4 July 2016 to order the recovery of the State aid granted to seven Spanish professional football clubs[1] were in a previous blog called historic. It was the first time that professional football clubs have been ordered to repay aid received from (local) public authorities. Less attention has been given to five other decisions also made public that day, which cleared support measures for five football clubs in the Netherlands. The clubs in question were PSV Eindhoven, MVV Maastricht, NEC Nijmegen, FC Den Bosch and Willem II.

Given the inherent political sensitivity of State aid recovery decisions, it is logical that the “Spanish decisions” were covered more widely than the “Dutch decisions”. Furthermore, clubs like Real Madrid and FC Barcelona automatically get more media attention than FC Den Bosch or Willem II. Yet, even though the “Dutch decisions” are of a lower profile, from an EU State aid law perspective, they are not necessarily less interesting.

A few days before entering the quiet month of August, the Commission published the non-confidential versions of its decisions concerning PSV Eindhoven, Willem II and MVV Maastricht (hereinafter: “MVV”). The swiftness of these publications is somewhat surprising, since it often takes at least three months to solve all the confidentiality issues. Nonetheless, nobody will complain (especially not me) about this opportunity to analyze in depth these new decisions.

In the case of PSV, the Dutch State argued successfully that the measure implemented by the city of Eindhoven was in line with the so-called ‘Market Economy Investor Principle’ (MEIP), thereby not constituting a selective advantage to PSV. In other words, the measure did not fulfill the criteria of Article 107(1) TFEU and was not considered State aid. The aid measures granted by the cities of Tilburg and Maastricht to Willem II and MVV respectively were considered compatible State aid under Article 107(3)c) TFEU. Interestingly enough, in the Willem II and MVV cases, the Dutch authorities also argued that the respective measures did not confer any selective advantage to the clubs, but they failed to convince the Commission.

A comparison between the PSV decision on the one hand, and the other “Dutch” decisions on the other, taking into account the definition and operation of the MEIP in the (professional) football sector, will be left for a future blog. This two-part blog, instead, will focus on the compatibility assessment under Article 107(3)(c) done by the Commission in the Willem II and MVV cases and explain why it considered the State aid measure justified.

Part one will serve as an introduction on the two cases. It will provide background information on the compatibility assessment. In part two, the compatibility assessment conducted by the Commission in the two decisions will be analyzed. As will be argued, the conditions set out by the Commission can serve as a blueprint for all public authorities within the EU willing to grant State aid to football clubs in financial difficulties.  

Background

Willem II

In 2004, the municipality of Tilburg and football club Willem II concluded a contract, by which Tilburg became the owner of Willem II’s stadium and the club obtained a lease for the use of the stadium.[2] The annual rent of the stadium was established at €1 million, based on a depreciation period of 30 years, investment costs and an interest rate of 5.5%.[3]

In May 2010, Willem II found itself on the verge of bankruptcy. The municipality was quick to realize the potential negative effects a bankruptcy could have for Tilburg. These negative effects consisted of (1) the loss of rental income; (2) the absence of a tenant for the stadium; (3) the absence of professional football in Tilburg; and (4) the necessity to demolish the stadium and all the costs it would entail.[4] As a result, on 31 May 2010 the municipality decided to lower the rent to €905,000 per year and to decrease the variable costs. Both measures were taken with retroactive effect till 1 July 2004, which resulted in Willem II receiving a total of €2.4 million from the municipality.[5]

Tilburg’s rescue operation of Willem II was never notified to the Commission.[6] Instead, a citizen informed DG Competition shortly after the measure was implemented by means of a letter. This prompted the Commission to send a request for information to the Netherlands on 14 March 2011.[7]

In response to the Commission, the Dutch authorities argued that the new rent agreement was in conformity with the current municipal calculation methods and that the basic principles of the 2004 agreement were still respected. Moreover, the costs Tilburg would suffer for letting Willem II go bankrupt would be higher than the rescue costs. Consequently, the municipality believed it acted in accordance with the so-called ‘Market Economy Investor Principle’ (MEIP).[8] Moreover, the municipality imposed a restructuring plan that aimed at restoring the club’s long-term viability. The conditions of this plan included finding a way to clean up its balance sheet and the need to respect the national football association's norms for salaries of players.[9]

In its decision to open a formal investigation, the Commission counter argued that the depreciation of the stadium’s rent was already adjusted in 2007, and would not justify the retroactive application until 2004. Additionally, the lowering of the variable costs with retro-active effects ended up to be lower than the actual maintenance costs for that period, and should therefore be considered as State aid in accordance with Article 107(1) TFEU.[10] Finally, at the time the Commission launched the formal investigation, it nourished doubts whether the aid measure could be considered compatible with the internal market pursuant Article 107(3)(c). Having received no notification of the rescue measure, the Commission was unable to carry out a proper compatibility assessment. 

MVV

In 2010, football club MVV was facing severe financial difficulties: its total debt amounted to €6.5 million, including €1.7 million to the municipality of Maastricht. As a means of aiding its local football club, the municipality decided to waive its claim of €1.7 million and bought the stadium for €1.85 million.[11] The municipality held that the purchase was done in accordance with the MEIP and that the stadium would be used for multifunctional purposes. The parties agreed that MVV would use the €1.85 million to finance preferential claims, such as taxes and pensions.[12] 

The Commission opened a formal investigation procedure, because it was unable to conclude on the basis of the available information (the rescue measures were not notified[13]) that the behaviour of the municipality had been that of the typical creditor in a market economy.[14] Firstly, it doubted whether a total remission of the claim (€1.7 million) was entirely necessary, since other creditors transformed their claim into a claim on future income from transfer payments or “only” waived 50% of their claim. Secondly, according to the Commission, the purchase price of the stadium was estimated on the basis of replacement value rather than the real market value. It further raised doubts as to whether the municipality acted in accordance with the MEIP since investing in a football stadium depending on one captive user entails a very high risk, even when claiming that you want to make it multifunctional.[15] Similar to the Willem II case, no compatibility assessment of the aid measure in favour of MVV was carried out, because the measure was not notified.[16] 

The rules on compatibility

Pursuant to Article 107(3)(c) TFEU, aid to facilitate the development of certain economic activities, where such aid does not adversely affect trading conditions to an extent contrary to the common interest, may be considered compatible with the internal market. Only the Commission has the competence (subject to control by the EU Courts) to determine whether or not certain aid merits derogation from the general prohibition of Article 107(1).[17] However, it is settled case law that it is up to the Member State to invoke possible grounds of compatibility and to demonstrate that the conditions for such compatibility are met.[18] Due to its own wide discretion to assess the compatibility, the Commission has developed its own methodologies and approaches over the years, found in the decisional practice, policy documents[19] and sector specific guidelines.[20] 

The Rescue and Restructuring Guidelines

The Community Guidelines of 1 October 2004 on State aid for rescue and restructuring firms in difficulty (hereinafter: “Rescue and Restructuring Guidelines”) primarily serve as a tool for the Commission to assess similar cases in a similar way.[21] The criteria and conditions laid down in the Guidelines are mostly based on the Commission’s own experience in dealing with cases involving State aid in favour of firms in difficulty and case law by the Court of Justice of the EU. Due to the continuous developments in the area of EU State aid law, the Guidelines are regularly updated.[22] In the Guidelines, the Commission sets out the conditions under which State aid for rescuing and restructuring undertakings in difficulty may be considered compatible with the internal market. These conditions include the notification obligation for the Member State,[23] as well as demonstrating that the firm qualifies as ‘a firm in difficulty’. As is stipulated in point 11 of the Guidelines, a firm is considered to be in difficulties where the usual signs of a firm being in difficulty are present, such as increasing losses, diminishing turnover and mounting debt.

In order to rescue a firm from bankruptcy, the Member State has to show that it limits the amount of aid provided to that which is strictly necessary to keep the firm in business.[24] Section 3.2 of the Guidelines requires that the grant of the aid must be conditional on the implementation of a restructuring plan that restores the long term viability of the firm.[25] The restructuring plan needs to be approved by the Member State concerned and communicated to the Commission.[26]

The Member States granting the restructuring aid will have to limit the amount and intensity of the aid to the strict minimum of the restructuring costs necessary to enable restructuring to be undertaken in the light of the existing financial resources of the firm. This also means that the beneficiaries are expected to make a significant contribution to the restructuring plan from their own resources.[27] The Commission will normally consider the following contributions to the restructuring to be appropriate: at least 25 % in the case of small enterprises, at least 40 % for medium-sized enterprises and at least 50 % for large firms.[28]

The Guidelines also stipulate that, in case the firm in difficulty is considered a medium-sized enterprise or larger[29], compensatory measures must be taken by the Member State that grants the rescue and/or restructuring aid in order to ensure that the adverse effects on trading conditions are minimized as much as possible, so that the positive effects pursued outweigh the adverse ones.[30] These last two conditions (i.e. limiting the aid to what is strictly necessary and introducing compensatory measures) have the aim of ensuring that the State aid measure is proportionate to the objective tackled, namely rescuing and/or restructuring a firm in difficulty.

Last but not least, the so-called ‘one time, last time’ principle has to be applied. According to this principle, rescue aid should only be granted once.[31] 

In the coming days, the key part of the Commission’s decisions, the compatibility assessment, will be discussed in part two of this blog.

[1] Real Madrid (twice), FC Barcelona, Valencia CF, Athletic Bilbao, Atlético Osasuna, Elche and Hércules.

[2] Commission Decision on State Aid SA.40168 of 4 July 2016 implemented by the Netherlands in favour of the professional football club Willem II in Tilburg, para. 10.

[3] Commission Decision SA.33584 of 6 March 2013 – The Netherlands Alleged municipal aid to the Professional Dutch football clubs Vitesse, NEC, Willem II, MVV, PSV and FC Den Bosch in 2008-2011, para. 29.

[4] Ibid, para. 30.

[5] Ibid.

[6] Ibid, para. 67.

[7] Ibid, paras. 3-4. To find out how a citizen’s letter can instigate a preliminary State aid investigation, see Ben Van Rompuy and Oskar van Maren, “EU Control of State Aid to Professional Sport: Why Now?” In: “The Legacy of Bosman. Revisiting the relationship between EU law and sport”, T.M.C. Asser Press, 2016.

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

[9] SA.40168, para. 12.

[10] SA.33584, paras. 29-31 and 51-53.

[11] Ibid, para. 32.

[12] Ibid, para. 57.

[13] Ibid, para. 67.

[14] Commission Decision on State Aid SA.41612 of 4 July 2016 implemented by the Netherlands in favour of the professional football club MVV in Maastricht, para. 12.

[15] SA.33584, paras. 54-57.

[16] SA.41612, para. 11.

[17] According to settled case law, national courts do not have the power to declare a State aid measure compatible with the internal market. See e.g. C-354/90, Fédération Nationale du Commerce Extérieur des Produits Alimentaires and Syndicat National des Négociants et Transformateurs de Saumon v French Republic, ECLI:EU:C:1991:440, para. 14.

[18] SA.41612, para. 42; see also Case C-364/90, Italy v Commission, ECLI:EU:C:1993:157, point 20.

[19] See for example Communication from the Commission COM(2012) of 8 May 2012 to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions – EU State Aid Modernisation (SAM), para. 12.

[20] See for example the Communication from the Commission OJ C25/01 of 26 January 2013 on the EU Guidelines for the application of State aid rules in relation to the rapid deployment of broadband networks, paras. 32-34.

[21] In July 2014, the Commission published new Guidelines on State aid for rescuing and restructuring undertakings in difficulty, but they are not applicable to aid granted in 2010.

[22] The Rescue and Restructuring Guidelines published in 2014 are the fourth of its sort after earlier versions published in 1994, 1999 and 2004.

[23] Communication from the Commission of 1 October 2004 (2004/C 244/02) Community Guidelines on State Aid for Rescuing and Restructuring firms in difficulty, point 25(c).

[24] Ibid, point 25(d).

[25] Ibid, poins 34-37.

[26] Ibid, point 59. In this regard, it should be noted that the Commission does not need to endorse the restructuring plan.

[27] By “own resources” the Commission also understands funding from external financiers at market conditions.

[28] Guidelines on State Aid for Rescuing and Restructuring firms in difficulty, points 43-44.

[29] The Commission’s definition of Small and Medium-Sized enterprises (SMEs), as stipulated in the Annex of the Commission Recommendation concerning the definition of micro, small and medium-sized enterprises, is also used in the Rescue and Restructuring Guidelines. Pursuant to Article 2 of the SME Recommendation, a small enterprise is defined as an enterprise which employs fewer than 50 persons and whose annual turnover and/or annual balance sheet total does not exceed €10 million, whereas a medium-seized enterprise is defined as an enterprise which employs fewer than 250 persons and which has an annual turnover not exceeding €50 million, and/or an annual balance sheet total not exceeding €43 million.

[30] Guidelines on State Aid for Rescuing and Restructuring firms in difficulty, point 38.

[31] Ibid, point 25(e) and section 3.3. In practice, this actually means that rescue or restructuring aid can only be granted once every 10 years.

Editor's note: Kevin Gerenni is Assistant Professor in Public International Law (Facultad de Derecho de la Universidad de Buenos Aires) and LLM Candidate 2021 in Public International Law at the London School of Economics.

Even though the decision rendered by the SFT in the Semenya Case was foreseeable, the Tribunal did put forward some concerning reasoning in terms of public policy (“ordre public”) and human rights. In case Semenya decides to challenge the Swiss state before the ECtHR, one can expect the case to shake some grounds at the ECtHR, which would be faced with the question of the application to sport not of fair trial guarantees (as in Mutu & Pechstein) but of substantial human rights provisions such as the prohibition of discrimination on the basis of sex (Article 14 ECHR) and the right to private life (Article 8 ECHR).

Under Swiss law, the reasons that may lead to the annulment of an arbitral award are enumerated in art. 190 of the Swiss Private International Law Act (PILA). Semenya’s strongest case relied on art. 190(2)(e): the award’s incompatibility with public policy. Naturally, this point concentrated most of the SFT’s attention. In order to analyze the compatibility of the CAS award with Swiss public policy, the SFT focused on three main potential breaches of human rights: prohibition of discrimination, personality rights, and human dignity. In doing so, it put forward certain observations that differ with European human rights standards and the ECtHR’s jurisprudence. The purpose of this short article is to analyze those discrepancies and, consequently, Semenya’s prospects of success before the Strasbourg Tribunal.

I.               The scope of Swiss public policy versus ECHR guarantees

To begin with, the SFT distinguished between Swiss public policy and the scope of the ECHR provisions:

“An award is incompatible with public policy if it disregards essential and widely accepted values which, according to the views prevailing in Switzerland, should constitute the foundation of any legal system” (para. 9.1).[1]

“This is the place to specify that the violation of the provisions of the ECHR or of the Constitution does not count among the grievances restrictively enumerated by art. 190(2) PILA. It is therefore not possible to directly invoke such a violation. (…) Thus, the plea alleging a violation of public policy is not admissible insofar it simply tends to establish that the award in question is contrary to the various guarantees drawn from the ECHR and the Constitution.” (para. 9.2).

Contrary to this interpretation, the ECtHR has referred to the fundamental role of the ECHR in specifying the reach of a European public policy. In Loizidou v. Turkey (Preliminary Objections), it stated:

“(…) the Court must bear in mind the special character of the Convention as an instrument of European public order (ordre public) for the protection of individual human beings and its mission (…) "to ensure the observance of the engagements undertaken by the High Contracting Parties" ” (para. 93).      

In that same judgment, it remarked the value of the ECHR as “a constitutional instrument of European public order (ordre public)” (para. 75). Similar understandings can be found in Bosphorus v. Ireland and Avotiņš v. Latvia, among others. As a consequence of this preeminent position that the ECHR holds, certain interests of the State must be outweighed by the Convention’s role in the field of human rights (Bosphorus at para. 156).

II.             The concept of “horizontal effect” in human rights violations

The SFT continued with the analysis of the prohibition of discrimination, for which it partially rest upon an argument that evidently collides with European human rights criteria. Although the Tribunal also concluded that the “relationship between an athlete and a global sports federation shows some similarities to those between an individual and a State” (para. 9.4), it did argue that under Swiss law the prohibition of discrimination does not have a direct horizontal effect. The SFT considered that:

“Although the SFT has consistently held that the prohibition of discrimination is a matter of public policy (…) it has done so, primarily, in order to protect the individual vis-à-vis the State. In this respect, it may be noted that, from the point of view of Swiss constitutional law, the case law considers that the guarantee of the prohibition of discrimination is addressed to the State and does not, in principle, produce a direct horizontal effect on relations between private persons. (…) It is therefore far from obvious that the prohibition of discrimination by private individuals is one of the essential and widely recognized values which, according to the prevailing conceptions in Switzerland, should form the basis of any legal system.” (para. 9.4).

The ECtHR has a long tradition of deeming States responsible for not preventing or sanctioning human rights violations between private persons, which means that the ECHR also applies horizontally. Since its 1981 ruling Young, James and Webster v. the UK, the Court has repeatedly held that the responsibility of a State is engaged if a violation of one of the Convention’s rights is the result of non-observance by that State of its obligation under Article 1 to secure those rights and freedoms to everyone within its jurisdiction.[2]

In Pla and Puncernau v. Andorra, the Court held the State responsible for the rulings of its domestic courts, which did not redress an individual from the discrimination inflicted by another private person. The Court, referring to its duties, clearly affirmed that:

“In exercising the European supervision incumbent on it, it cannot remain passive where a national court’s interpretation of a legal act, be it a testamentary disposition, a private contract, a public document, a statutory provision or an administrative practice appears unreasonable, arbitrary or, as in the present case, blatantly inconsistent with the prohibition of discrimination established by Article 14 and more broadly with the principles underlying the Convention.” (para. 59).

Finally, in this same vein in Identoba and Others v. Georgia, the ECtHR sanctioned the State by explaining that the difference in treatment leading to discrimination can source from a purely private action, which in this particular case included attacks to a transgender person.

III.           The necessity and proportionality of the DSD regulations

Throughout its ruling, the SFT followed the reasoning advanced by the CAS to determine that the IAAF (today “World Athletics”) DSD regulations were not in violation of fundamental human rights. With a view to analyzing a recourse to the ECtHR, I will focus on the discrimination and human dignity sections of the ruling (for a remarkably-detailed insight of the SFT’s core findings please refer to  Marjolaine Viret’s recent blog).

In assessing the necessity of the DSD regulations –pursuant to the alleged legitimate aim of fair competition– the SFT considered that “female athletes are disadvantaged and deprived of chances of success when they have to compete against 46 XY DSD athletes. The statistics speak for themselves.” (para. 9.8.3.4). A fact that does not seem to be getting attention is the “800 Metres Women” all-time records table, which lists three women with a better time than Caster Semenya. None of these three women were reported to be DSD athletes. Also, the scientific articles that supposedly demonstrate unequivocal advantage for DSD athletes have been denounced as flawed (for example, by Pielke Jr., Tucker & Boye). Nevertheless, the SFT invoked the ECtHR’s FNASS and Others v. France to shockingly conclude that “the search for a fair sport represents an important goal which is capable of justifying serious encroachments upon sportspeople’s rights”[3] (para. 9.8.3.3).

In addition, the SFT assessed the proportionality of the regulations vis-à-vis the potential gender identity implications. The SFT primarily relied on the allegedly-mild side effects caused by the hormonal treatment: “no different in nature from the side effects experienced by thousands, if not millions, of other women of type XX” (para. 9.8.3.5).

Referring to gender identity (stemming from human dignity), the SFT argued that:

“It must be made clear that the sentence does not in any way seek to question the female sex of the 46 XY DSD athletes or to determine whether they are sufficiently “female”. It is not a question of knowing what a woman or an intersex person is. The only issue to be resolved is whether it is contrary to human dignity to create certain rules of eligibility, for the purposes of sporting equity and equal opportunity, applicable only to certain women who enjoy an insurmountable advantage arising from certain innate biological characteristics. (…) In some contexts, as specific competitive sport, it is permissible that biological characteristics may, exceptionally and for the purposes of fairness and equality of opportunity, overshadow a person’s legal sex or gender identity.” (para. 11.1).

The SFT struggles to highlight that Semenya’s “female sex” is not under question. However, the DSD regulations, implemented in competitions that are divided into the male/female binary, denote that Semenya’s innate sex is not female enough as to compete in female events. On the other hand, she is allowed to compete in male events.

The ECtHR has a growing jurisprudence relating to discrimination on the basis of sex which, especially linked to gender identity, leads to violations of the ECHR Articles 14 and 8. In the 2002 leading case Goodwin v. the UK which dealt with Article 8 ECHR violations, the Court remarked that:

“It is not apparent to the Court that the chromosomal element, amongst all the others, must inevitably take on decisive significance for the purposes of legal attribution of gender identity for transsexuals.” (para. 82).

It is true that Goodwin involved the rights of a trans person, not intersex.[4] However, as the European Commission points out in its Trans and intersex equality rights in Europe – A comparative analysis, the judgment was the inception of States obligation to legally recognize preferred gender in Europe. Similar conclusions in favor of gender identity would later appear, among others, in Y. Y. v Turkey, Van Kück v. Germany and Identoba and Others v. Georgia (this last one dealing with Article 14 ECHR). In Garçon and Nicot v. France the Court underpinned that “the right to respect for private life under Article 8 applies fully to gender identity, as a component of personal identity. This holds true for all individuals.” (para. 95). Later in that judgment, it rendered a particularly relevant observation for Semenya’s case:

“Medical treatment cannot be considered to be the subject of genuine consent when the fact of not submitting to it deprives the person concerned of the full exercise of his or her right to gender identity and personal development, which, as previously stated, is a fundamental aspect of the right to respect for private life.” (para. 130).

It must be noted that this paragraph pertains particularly to the world of sport. “Personal development” is a fundamental part of the Principles of the Olympic Movement, as this article by Durántez Corral et al. indicates.

Conclusions

The reasoning behind the above paragraphs supports Semenya’s case before the ECtHR and would give her a serious chance to prevail in Strasbourg. Even though it is true that the Court has mostly endorsed the lex sportiva system with its judgments FNASS, Platini and Mutu & Pechstein, the latter did aim at certain fair trial deficiencies and triggered concrete changes. Could Semenya’s case be stronger? Yes, for instance if Switzerland had ratified Protocol No. 12 ECHR or if the former IAAF were based in Switzerland instead of Monaco (an issue which the SFT took care to highlight).

On the other hand, the judges could additionally resort to extremely relevant reports in the field of intersex rights, namely the Council of Europe’s document on eliminating discrimination against intersex people, or refer to the categorical document against DSD regulations written by three UN experts. Needless to say, these instruments support the athlete’s claims even further.

The scenario is set for Semenya to create considerable turmoil if she decides to take the case to Strasbourg, where the ECtHR will have to engage –once again and deeper this time– with lex sportiva and Switzerland’s role in ensuring that sports governing bodies comply with human rights. Or, will it look the other way?

*All translations of the SFT’s decision done by the author from French, except where otherwise noted.

[1] Translation done by Marjolaine Viret for her blog article “Chronicle of a Defeat Foretold: Dissecting the Swiss Federal Tribunal’s Semenya Decision”, available here.

[2] See Spielmann, D.; “Chapter 14: The European Convention on Human Rights, The European Court of Human Rights” in Human Rights and the Private Sphere: A Comparative Study (p. 430); Eds. Oliver, D. &  Fedtke, J.; Routledge; 2007. 

[3] Translation done by Marjolaine Viret for her blog article “Chronicle of a Defeat Foretold: Dissecting the Swiss Federal Tribunal’s Semenya Decision”, available here.

[4] As shown in the excerpt, the judgment did address the relevance (or the lack of it) of the “chromosomal element” in defining a person’s gender.

Editor’s note: Kester Mekenkamp is an LL.M. student in European Law at Leiden University and an intern at the ASSER International Sports Law Centre. This blog is, to a great extent, an excerpt of his forthcoming thesis, which he shall submit in order to complete his master’s degree.

This is the second part of a three-piece blog on FIFA’s provision on the protection of minors, Article 19 of the Regulations on the Status and Transfer of Players. The contribution in its entirety aims to provide an encompassing overview of the rule’s lifespan since its inception in 2001. The previous (first) part has shed light on the “birth” and “first years” of the provision, and as such illustrated the relevant developments from 2001 till 2009. This second part covers the rule’s “adolescent years”, which span from 2009 to the present. The major changes put forward in the 2009, 2015 and 2016 versions of the RSTP will be addressed. Thereafter the important CAS decisions concerning Article 19, Muhic, Vada I and II, FC Barcelona, RFEF, and the FIFA decisions relating to Real Madrid and Atlético Madrid, will be scrutinized. The third, and final, part will constitute a substantive assessment of the provision under EU Internal Market law.

Given that the version adopted in 2008 left Article 19 untouched, the 2009 RSTP represented the next significant step in the regulation of the protection of minors. It had become clear that the system as used up to that point was inadequate to achieve its goal,[1] most notably because several national associations still neglected to strictly apply the rules.[2] In response to this perceived failure, a new set of rules and procedures was adopted and came into force on 1 October 2009: the creation of a special FIFA oversight sub-committee of the PSC, the introduction of a special provision on football academies, and the instalment of a transfer matching system.[3] Importantly, with the enactment of these new regulations, Articles 19 and 19bis RSTP were included in the set of provisions binding upon the national level, which consequently had to be incorporated into the national associations’ regulations without alteration.[4]

This new 11-member PSC sub-committee (consisting of representatives of the confederations, leagues, clubs, players and the PSC’s chairman and deputy chairman) became the supervising body concerning the examination, and potential approval, of every international transfer and first registration of a minor player.[5] Its approval is mandatory and needs to be obtained prior to any request for any association’s ITC-request.[6] Moreover, non-compliance can be sanctioned by the FIFA’s Disciplinary Committee, although a limited exception from this obligation exists for minor amateur players.[7]

Article 19bis RSTP on the registration and reporting of minors at academies was another substantial modification with respect to the protection of minors.[8] A football academy is defined by the regulations as “an organisation or an independent legal entity whose primary, long-term objective is to provide players with long-term training through the provision of the necessary training facilities and infrastructure. This shall primarily include, but not be limited to, football training centres, football camps, football schools, etc.”[9] With the creation of this new provision, all minor players that attend an academy, indifferent to whether or not that academy takes part in a national championship or has a legal, financial or de facto link to a club participating in a national championship, must be reported to the national association upon whose territory the academy operates.[10] This regulation of academies resembles an attempt to deal with what was previously a major loophole, the unregistered academies.[11]

The third major change was the instalment of a transfer matching system (“TMS”), which is a web-based data information system that, first of all, aims to simplify the processing of international transfers.[12] Its task is to provide more details to football’s governing bodies on all transfers taking place.[13] This should furthermore increase the transparency of the individual transactions, and in doing so, it will “improve the credibility and standing of the entire transfer system, and additionally also “safeguard the protection of minors”.[14] In practice, the TMS is a central database that monitors the international movement of players. As mentioned earlier, every application for an international transfer by a minor player must receive the approval of the PSC sub-committee. This process is managed through the transfer matching system, the details of which are stipulated in annexe 2 of the RSTP.[15] The sub-committee decides with three of its members, or, in urgent cases, through a sole member acting as “single judge”.[16] The national association wanting to register a player, files the application for an approval of an international transfer (or first registration) into the TMS.[17] Accompanying this application, the TMS requires a great number of specific documents, depending on the facts of the case and the exception that is being invoked.[18] This mandatory release of information spans documentation on, inter alia: academic and football education, accommodation, player’s and/or player’s parent(s) contract, parental authorisation and a birth certificate.[19] Subsequently, the sub-committee decides whether or not it gives its approval. If so, an ITC will be delivered via the TMS and the transfer can be finalized.[20] Parties involved have 10 days to inquire for the grounds of the decision, after that an appeal before the CAS is still open. Note that this procedure for minors differs from a regular international transfer, in that for the latter there is no substantive review by a third party. The clubs provide the relevant information and the TMS merely, automatically, checks whether the two strands of facts match.[21]

The Elmir Muhic case

The regulatory system laid down in the 2009 RSTP operates in roughly the same manner today, as the revisions of 2010, 2012, 2014, 2015, did not substantially amend the core rules.[22] The case law of the CAS during this period, from 2009 to 2012, provides some examples of the application and interpretation of the 2009 rules.

In Elmir Muhic v. FIFA, a 16-year-old football player from Bosnia-Herzegovina joined the German OFC Kickers Offenbach.[23] Following the PSC sub-committee refusal to give its approval, the case ended up before the CAS. The Panel found that none of the three exceptions applied in the matter at hand. It did specify, in relation to the “parents-rule” of Article 19(2)(a), that the term “parents” needs to be applied stricto sensu.[24] Even though it could “conceivably cover situations beyond the natural parents”, such was not the case here.[25] Muhic’s parents still lived in Bosnia and Herzegovina (and it remained uncertain why they did not joined their child), while the player stayed at his aunt’s house.[26] The Panel stated that an aunt (and relatives alike) cannot replace the player’s parents in order to invoke the exception.[27] 

The Vada II case

Around the same time, Vada II made an important contribution to the application of Article 19(2)(b) (the first case had evolved along the lines of the Acuña award).[28] Valentin Vada was a football player living in Argentina, with dual citizenship. Next to possessing the Argentinian nationality, Vada also owned an Italian passport.[29] The 16-year-old was of the opinion that he could transfer to the French Club Girondins de Bordeaux, based on the “EU and EEA-rule” of Article 19(2)(b) RSTP.[30] FIFA’s single judge rejected the request, as he found the facts of the transfer not to match the strict requirements of the exception.[31] The arbiter reasoned that this exception is based on the criterion of territoriality, not nationality, and thus only refers to “a transfer taking place within the territory of the EU or EEA”.[32] Therefore, as Vada wished to transfer from an Argentinian club, Article 19(2)(b) RSTP could not be applied. Be that as it may, the CAS Panel argued (in length) otherwise. It agreed that the “EU and EEA-rule” merely stipulates a criterion of territoriality not nationality.[33] Still, it also noted that the FIFA’s RSTP commentary (as abovementioned) revealed that this exception was included in the 2001 informal agreement between FIFA/UEFA and the Commission in order for it to respect EU free movement law.[34] Thus, this objective to comply with EU free movement rights could not be ignored.[35] Additionally the CAS found, in line with FC Midtjylland, that the list of exceptions in Article 19(2) is not exhaustive.[36] This was supported by a document submitted by Girondins de Bordeaux setting out the case law of the PSC sub-committee. It explained that “if a club believes that very special circumstances, which do not meet any of the exceptions provided…the association of the club concerned may, on behalf of its affiliate, submit a formal request in writing to the FIFA sub-commission to consider the specific case and make a formal decision”.[37] Moreover, the document showed that the sub-committee in the majority of cases takes free movement law into consideration when “assessing the transfer of a player who, with a passport from an EU or EEA country, wishes to register with a club in an EU or EEA country”.[38] Consequently, the Panel accepted an unwritten exception allowing a player such as Vada, with the nationality of one of the EU or EEA member countries, to invoke Article 19(2)(b) RSTP.[39] 

The Spanish lawbreakers

From 2013 onwards the three biggest and richest football clubs in Spain, at the same time belonging to the top 15 clubs worldwide, Atlético Madrid, Real Madrid and FC Barcelona, found themselves embroiled in a number of legal disputes as a result of signing minors.[40] A significant step unto its own, as it demonstrates that FIFA will not shy away from taking on the big iconic clubs when enforcing its regulations.

This “Spanish saga” kicked-off with a dispute concerning a US teenager, of 13 years old, who moved to Spain together with his parents and wanted to register with Atlético Madrid in September 2012.[41] Once more, the main question was whether the factual constellation of the case supported the application of the “parents-rule” (did the parents move to the country of the new club for reasons not linked to football?), and again the Panel stressed, in line with both Acuña and FC Midtjylland,[42] the need to apply the protection of minors rules in a “strict, rigorous and consistent manner”.[43] This means, following its decision in Vada I, that the family’s move must be unconnected altogether to football.[44] It is insufficient to establish that the move is partially connected to their child’s football activities, although not being the primary aim.[45] The Panel’s factual assessment distinguished multiple relevant elements to come to a decision on the possible application of the exception. Contra: the short timeline (six weeks) between the minor’s arrival in Madrid and the registration request (which hints at a previous intention); the player’s previous footballing activities; the player’s statement, reported on his school’s official website, “that the reason of his move to Spain was the possibility that he has been given to play with the Club Atlético de Madrid”.[46] Pro: the family of the player is partially Colombian, which connected them to Spain for reasons of culture and language; “The family is wealthy and…the basic maintenance of the family is not dependent of a working activity of the parents”; The player’s sister had already moved to Europe for her studies; The first preparations were undoubtedly made several months before the interaction with the club commenced; The club does not have a particular interest in the player “other than having in its team a teenager which may have a certain talent for football, such as many others in the Madrid area”.[47] In sum, the CAS concluded that, due to the exceptional facts, there is no link between the move of the family and their son’s football activities.[48]

The FC Barcelona case

Atlético’s fellow-townsman Real Madrid ended up in a likewise dispute with FIFA regarding a 13-year-old player from Venezuela.[49] The main hitter however was the case regarding their Catalonian archenemy: FC Barcelona.[50] The FIFA TMS, in January 2013, became aware of a potential breach, which ultimately lead to a case involving registrations of 31 minors.[51] These players, of various nationalities, were registered at FC Barcelona in the period from 2005 until 2012.[52] Via the FIFA Disciplinary Committee and Appeal Committee, who both found the club to have violated i.a. Articles 19(1), 19(3), 19(4), 19bis, and Annexe 2 of the RSTP, the case ended up before the CAS.[53] The Panel addressed the different potentially breached articles in a consecutive order, starting with Article 19(1) RSTP. The Panel found FC Barcelona to have infringed this provision with respect to nine players. The club had tried to shelter behind the fact that it had complied with all the rules laid down by the regional Catalonian football association, and, as such, had acted rightfully. The Panel held instead that the ban on internationally transferring minors is without doubt “addressed to both ‘associations’ and clubs”.[54] It thereby emphasized that national associations are paramount to the enforcement of FIFA’s statutes, and in the extent thereof the enforcement of the RSTP. Regional associations, such as the Catalonian, cannot govern the international transfer of players.[55] Given that clubs are the starting point of every international transfer, they “must primarily observe this ban”. The Panel stressed furthermore that Article 19(4) RSTP marks this by obliging the associations to ensure the clubs’ compliance in this matter, and moreover, Article 1(4) RSTP, explains that the Regulations “are binding for all associations and clubs”.[56] FC Barcelona may thus not hide behind apparent mistakes/breaches by both the Catalonian and the Spanish football associations, given that it “did not even try to request the transfers based on any one of the exceptions”.[57] Furthermore, FC Barcelona “should have been aware of the simple fact that they [the Spanish and the Catalonian associations] could not register the minors in any legitimate way under the RSTP”, which the CAS compared to “wilful ignorance” or, the “deliberate shutting of eyes”.[58]

Of the group of minors at the centre of the dispute, three were below the age of 12. FC Barcelona put forward a restrictive reading of the personal scope of application of the Articles 19 and 9(4) RSTP (2010 edition), arguing “that there are no prohibitions for the transfer of players under the age of 12”.[59] It thereby relied on Article 9 of the 2006 RSTP Commentary that stipulates “for players younger than 12, the Regulations do not provide for an obligation to issue an ITC for international transfers”.[60] The Panel nonetheless made short work of this argumentation by explaining that Article 9(4) RSTP’s absence of an obligation to issue an ITC for under-12 players merely addresses a formal requirement. The substantive rules for the international transfer of minors (irrespective whether below or above 12 years of age) are found in Article 19 RSTP, including paragraph 2 of that article.[61] This led the Panel to conclude that “no ITC was required when the transfers occurred for players below the age of 12; their transfer nevertheless, can only be lawful if it complies with the requirements embedded in Article 19(2) RSTP”.[62] The Panel also noted the amendment to Article 9(4) RSTP, effective as of 1 March 2015, which lowered the age at which an ITC is required from 12 to 10.[63]

In short, the CAS also ruled that FC Barcelona had violated Article 19(3) RSTP in relation to one minor, for the same reasons referred to in its findings under Article 19(1) RSTP.[64] Moreover, six cases violated Article 19(4) RSTP, as the Catalonian association had failed to refer these transfers to the PSC sub-committee. These infringements of paragraph 4 further justify that “sanctions may also be imposed (…) on the clubs that reached an agreement for the transfer of a minor”. The CAS in this regard defined the interpretation of the word “agreement” to include “agreements concluded between the registering club and the player himself, his parents, agents, etc”.[65] Further, the Panel established a breach of Article 19bis RSTP for all 31 players under investigation.[66] This constitutes a procedural violation, being “the lack of reporting of information regarding the progress and development of players” attending FC Barcelona’s well-known academy ‘La Masía’”.[67] Be that as it may, the CAS did praise the training and educational track record of La Masía. Thereby it deviated from the Appeal Committee’s ruling. In opposition to the latter it found that the attending players’ potential football careers are not endangered. On the contrary, if FC Barcelona in the future commits itself to its reporting duties under Article 19bis RSTP, then it “will be contributing to the overarching principles governing the protection of minors, since it will be providing other clubs with an enviable benchmark for the education and training of players”.[68] The CAS Panel found the sanctions imposed by the FIFA Disciplinary Committee and the Appeal Committee to be proportionate, and hence confirmed the earlier verdict.[69] Concretely, FC Barcelona was imposed a transfer ban for two transfer periods, as well as a fine of CHF 450,000.[70]

The RFEF case and latest developments

Things had not completely settled down yet with regard to the Spanish national football association: Real Federación Española de Fútbol (“RFEF”).[71] As has become clear in the coverage of the Barcelona case, apparent mistakes were made in the Spanish supervision of the ban on international transfers of minors. In a dispute regarding 31 international minor transfers to several Spanish football clubs[72], the RFEF was found by the CAS to have violated its guarding role and thereby induced a passive infringement of Articles 19(1), 19(3), 19(4) together with Annexes 2 and 3, and Articles 5(1) and 9(1) RSTP. [73] A fine of CHF 280,000 was imposed. The Panel pointed out that the RFEF could not justify its failure by arguing that the RSTP was conflicting with Spanish law, given that the rules on the protection of minors had come about in the 2001 agreement between FIFA/UEFA and the EU, which was acknowledged by Spain as a Member State of the EU.[74] Also, for 21 players below the age of 12 the RFEF had failed to fulfil its notification obligations, which the Panel condemned for the exact same reasons as in the FC Barcelona case.[75] The RFEF had failed to “make use of the statutory frameworks and tools at its disposal to ensure the full protection of minors”, and was found negligent as it failed to ensure that clubs and regional associations strictly complied with Article 19.[76] Furthermore, it had in some cases not fulfilled its obligation to seek the approval of the PSC subcommittee nor even submitted an application for such transfers.[77]

Ultimately in 2016, a fate similar to that of “Barça” fell upon both Atlético and Real Madrid.[78] The concise FIFA press release indicates that investigations were conducted by FIFA TMS, which “concerned minor players who were involved and participated in competitions with the clubs over various periods”, between roughly 2005 and 2014. Both clubs were sanctioned for violating, amongst others, Articles 19 and 19bis as well as annexe 2 of the RSTP. The clubs appealed (by which the sanctions were temporarily lifted), yet in September 2016 these appeals were similarly rejected by FIFA’s Appeal Committee.[79] This meant that Atlético Madrid and Real Madrid will have to serve a transfer ban lasting two consecutive transfer periods (e.g. until January 2018), during which they will not be able to attract any players, and were fined CHF 900,000 and CHF 360,000 respectively. The clubs were given a 90 day period “to regularise the situation of all minor players concerned”.[80] A little over a week later, Real Madrid informed the CAS that it would appeal FIFA’s decision before the court in Lausanne.[81] The final outcome of this appeal is still unknown.

In a similar vein, very recently, the English club Manchester City has come under suspicion for allegedly wanting to transfer a 15-year-old player from Argentina, while the Dutch club Ajax was denied by the CAS to sign an American player aged 15.[82] These cases exemplify that clubs might just not be ready to put the practice of internationally transferring minors to bed yet. Moreover, the adaptation of the relevant rules is a sign for the need of continuous monitoring the effect of the provision on the protection of minors. The latest update, the June 2016 version, has incorporated another exception to the prohibition for the international transfer of minors, which has been created through the Sub-Committee’s case law.[83] Players that have for the five years preceding the request continuously lived in the country (other than that of their nationality) of intended registration are now exempted from the prohibition.[84]

In this part 2 of the blog, I have shown that FIFA’s restrictions on minor transfers have become more stringent after the 2009 reform. In recent years, FIFA has also cracked down on various prominent clubs, especially in Spain, which were still involved in recruiting minor players while disregarding, with the tacit support of their national federation, FIFA’s rules. Unsurprisingly, these developments have also flared up again the debate on the compatibility of those rules with EU law.[85] Thus, the next, third and final, part of this blog on FIFA’s provision on the protection of minors will offer a substantive assessment of FIFA’s rule under the requirements of EU Internal Market law. 

[1] A. Najarian, “’The Lost Boys’: FIFA's Insufficient Efforts To Stop Trafficking of Youth Footballers”, Sports Law. J. 2015, p. 167; R. Simons, “Protection of Minors vs. European Law”, Eur Sports Law Bulletin 2010, p. 172.

[2] R. Simons, “FIFA Transfer Matching System wel effectief?”, TvS&R 2011, p. 100.

[3] FIFA Circular no. 1190, 20 May 2009.

[4] Ibid.

[5] Art. 19(4) FIFA RTSP 2009.

[6] FIFA Circular no. 1206, 13 October 2009.

[7] FIFA Circular 1209, 30 October 2009.

[8] Art. 19bis FIFA RSTP 2009.

[9] Definition 12 FIFA RSTP 2009.

[10] Art. 19bis(1) and (2) FIFA RSTP 2009; Supra at 5.

[11] V. Derungs, “Protecting underage football players in the transfer system”, World Sports L. Report 2015, p. 15.

[12] Definition 13 FIFA RSTP 2016.

[13] N. St. Cyr Clarke, “The beauty and the beast: Taming the ugly side of the people’s game”, 2011 Columbia Journal of European Law, p. 619.

[14] FIFA Circular No. 1174, 12 January 2009.

[15] Annexe 2 FIFA RSTP 2016

[16] Art. 3(2) Annexe 2 FIFA RSTP 2009.

[17] Art. 5(1) Annexe 2 FIFA RSTP 2009.

[18] Art. 5(2) Annexe 2 FIFA RSTP 2009.

[19] FIFA Document, Protection of minors – Pertinent facts to be included in documents.

[20] Art. 9 and Annexe 3 FIFA RSTP 2009.

[21] For precise steps see FIFA TMS, Global Transfer Market Report 2016, p. 8; Supra at 4, p. 101.

[22] FIFA, Transfers, Player’s status, Clubs, Agents Regulations - Archived regulations

[23] Arbitration CAS 2011/A/2354 E. v. Fédération Internationale de Football Association (FIFA), award of 24 August 2011: At the same time, he participated in a three-year educational/trainee program at a company in Frankfurt, which aimed “to prepare him as office clerk to apply for a job as ‘Airport Manager’”. The German national football association, on behalf of Muhic and Kickers Offenbach made a request to FIFA for an exception via a special authorization for the transfer, founded on the “hardship based on the specific circumstances of the present case, namely the move of the player from Bosnia and Herzegovina to Germany without his parents, but with their expressed consent, for reasons not linked to football but to benefit from a humanitarian educational project” (p. 2.).

[24] Ibid, para. 17.

[25] Ibid, para. 18.

[26] Ibid, para. 18 and p. 2; Furthermore, the Panel recalled that Bosnia and Herzegovina is neither a member of the EU nor of the EEA and, as a consequence thereof, a player with this nationality cannot rely on the exception of Article 19(2)(b) RSTP (para. 20). The Panel subsequently, by emphasizing that the rationale for this exception is the “free movement of services and services suppliers within the EU and the EEA (and other production factors)”, quickly dismissed the appellant’s claim for the application of this provision resting on “the Stabilization and Association Agreement signed between the EU and Bosnia and Herzegovina” (paras. 21-23). In final, the CAS once more indicated that Article 19’s rationale was not to stop voluntary movement, yet it felt compelled to apply the protection of minors strictly: “Opening up the door to exceptions beyond those carefully drafted and included in the present text would unavoidably lead to cases of circumvention of the rationale for this provision” (para. 26). Moreover, Muhic could still continue his education, which was his primary reason to move to Germany, and likewise train with his team. He did have to wait a few months before becoming 18 years of age and thus eligible to start in professional matches. Nevertheless, the Panel concluded that this could not amount to constitute an “exceptional hardship going beyond the general impact of the provisions on the protection of minors” (para. 27).

[27] Supra at 11, p. 15.

[28] Arbitrage TAS 2012/A/2862 FC Girondins de Bordeaux c. Fédération Internationale de Football Association (FIFA), sentence du 11 janvier 2013 (Vada II); Arbitrage TAS 2011/A/2494 FC Girondins de Bordeaux c. Fédération Internationale de Football Association (FIFA), sentence du 22 décembre 2011 (Vada I).

[29] TAS 2012/A/2862 (Vada II), para. 3.

[30] Ibid, para. 18.

[31] Ibid, para. 19.

[32] Ibid, para. 19; Bulletin TAS CAS Bulletin 2014/2, p. 29.

[33] Supra at 29, para. 91.

[34] Ibid, para. 94.

[35] Ibid, para. 95.

[36] CAS 2008/A/1485 FC Midtjylland A/S v. Féderation Internationale de Football Association, paras. 19-21.

[37] Supra at 29, para. 96; Bulletin TAS CAS Bulletin 2014/2, p. 29.

[38] Supra at 29, para. 97.

[39] Ibid, paras. 98-100.                                                                                                                                                                  

[40] The Guardian, 29 April 2015, “Atlético Madrid and Real deny reports they are facing Fifa transfer embargo”.

[41] Arbitration CAS 2013/A/3140 A. v. Club Atlético de Madrid SAD & Real Federación Española de Fútbol (RFEF) & Fédération Internationale de Football Association (FIFA), award of 10 October 2013.

[42] CAS 2005/A/955 Càdiz C.F., SAD v FIFA and Asociación Paraguaya de Fútbol and CAS 2005/A/956 Carlos Javier Acuña Caballero v/FIFA and Asociación Paraguaya de Fútbol; CAS 2008/A/1485 FC Midtjylland A/S v. Féderation Internationale de Football Association.

[43] Supra at 41, paras. 8.20-8.23.

[44] TAS 2011/A/2494 FC (Vada I), paras. 31-38.

[45] Supra at 41, paras. 8.25.

[46] Ibid, para. 8.30.

[47] Ibid, para. 8.31.

[48] Ibid, paras. 8.32-36.

[49] Arbitration CAS 2014/A/3611 Real Madrid FC v. Fédération Internationale de Football Association (FIFA), award of 27 February 2015: The PSC Sub-Committee had rejected the request, which was again founded on the “parent rule”. It did so inter alia since the player’s parents had merely obtained a temporary residence permit that denied them the right to work, while the submitted employment contracts “made reference to enterprises incorporated and domiciled in Venezuela” (para. 11). This in combination with the fact that the player had moved to Spain one month in advance of his parents, led the PSC to believe that their move was linked to Real Madrid’s interest in their son (paras. 12-14). The subsequent proceedings before the CAS are only of interest in relation to the procedural aspects, since the appeal was declared inadmissible and consequently did not address the merits (paras. 63-66).

[50] CAS 2014/A/3793 Fútbol Club Barcelona v. Fédération Internationale de Football Association (FIFA), award of 24 April 2015.

[51] Bulletin TAS CAS Bulletin 2015/2, p. 76; Supra at 52, paras. 2.3-2.11.

[52] Supra at 50, para. 2.2.

[53] Supra at 51, p. 77.

[54] Supra at 50, paras. 9.1-9.2.

[55] Ibid, paras. 9.2-9.3.

[56] Ibid, para. 9.4.

[57] Ibid.

[58] Ibid.

[59] Ibid, para. 9.7.

[60] Ibid.

[61] Ibid, para. 9.8.

[62] Ibid.

[63] Ibid, para. 9.9.

[64] Ibid, paras. 9.10-9.12.

[65] Ibid, para. 9.14.

[66] Ibid, para. 9.18.

[67] Ibid, para. 9.19.

[68] Ibid.

[69] Ibid, paras. 9.29-9.36 and 10.

[70] Ibid, para. 2.18.

[71] CAS 2014/A/3813 Real Federación Española de Fútbol (RFEF) v. Fédération Internationale de Football Association (FIFA), 27 November 2015.

[72] Coincidentally the exact same number of minors under investigation as in the FC Barcelona Case. Be that as it may, in the case a hand the minors transferred to various Spanish clubs.

[73] Bulletin TAS CAS Bulletin 2016/1. P. 66.

[74] Ibid, p. 63, the Panel stated “As a member of the European Union, the Kingdom of Spain had acknowledged the application of this general prohibition throughout Spain and no express Spanish law stating otherwise had been brought to the Panel’s attention”.

[75] Supra at 73, p. 63.

[76] Ibid, p. 64.

[77] Ibid.

[78] FIFA, 14 January 2016, “Atlético de Madrid and Real Madrid sanctioned for international transfers of minors”.

[79] FIFA, 8 September 2016, “FIFA rejects appeals of Atlético de Madrid and Real Madrid in relation to transfers of minors”.

[80] The Guardian, 8 September 2016, “Real Madrid and Atlético Madrid lose appeals against Fifa transfer ban”.

[81] CAS, 16 September, “Request for stay filed by Real Madrid CF granted by the Court of Arbitration for Sport”.

[82] Independent, 22 September 2016, “Manchester City could face transfer ban after being reported to Fifa for 'trafficking' of youngster”; USA Today, 29 October 2016, “CAS rejects US teenager’s challenge to FIFA transfer rules”.

[83] Supra at 11, p. 15; FIFA Circular no. 1542, 1 June 2016.

[84] Art. 19(3) FIFA RSTP 2016.

[85] Reuters, 24 November 2016, “FIFA faces lawsuit over rules banning transfer of minors”.