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Multi-Club Ownership in European Football – Part II: The Concept of Decisive Influence in the Red Bull Case – By Tomáš Grell

 

Introduction 

The first part of this two-part blog on multi-club ownership in European football outlined the circumstances leading to the adoption of the initial rule(s) aimed at ensuring the integrity of the UEFA club competitions (Original Rule) and retraced the early existence of such rule(s), focusing primarily on the complaints brought before the Court of Arbitration for Sport and the European Commission by the English company ENIC plc. This second part will, in turn, introduce the relevant rule as it is currently enshrined in Article 5 of the UCL Regulations 2015-18 Cycle, 2017/18 Season (Current Rule). It will then explore how the UEFA Club Financial Control Body (CFCB) interpreted and applied the Current Rule in the Red Bull case, before drawing some concluding remarks. 

 

The Red Bull case: The concept of decisive influence

Background 

The company Red Bull GmbH (Red Bull) started building its football empire[1] in 2005 by transforming the Austrian club SV Wüstenrot Salzburg[2] into what would henceforth be known as FC Red Bull Salzburg (RB Salzburg). As regards its legal form, RB Salzburg is currently a limited liability company (GmbH) wholly owned by the association FC Red Bull Salzburg e.V. Until 2015, when the club began a disengagement process from Red Bull, the statutes of FC Red Bull Salzburg e.V. conferred on Red Bull the right to appoint and remove the members of the association's board.

In 2009, with the objective of playing the top-flight Bundesliga within a decade, Red Bull invested in the German club SSV Markranstädt, at that time competing in the fifth tier of German football. The club was subsequently rechristened as RasenBallsport[3] Leipzig (RB Leipzig) and rebranded. Although RB Leipzig thrived on the pitch, it attracted much criticism off the pitch for attempting to circumvent the so-called '50+1 rule', according to which German football clubs may not allow investors to acquire a majority of their voting rights.

Since Red Bull's takeover of RB Leipzig in 2009, the two clubs have maintained a close cooperation involving an increased transfer activity which has seen players moving from one club to the other on a regular basis. With the help of players like Naby Keïta, who moved from RB Salzburg to RB Leipzig in the summer of 2016, the German club finished second in the 2016/17 Bundesliga season, its first-ever in the top flight, and qualified for the 2017/18 UCL group stage. RB Salzburg, for their part, added in the 2016/17 campaign another domestic title to their collection and secured a spot in the 2017/18 UCL second qualifying round.

The Current Rule  

As mentioned above, the Current Rule is encapsulated in Article 5 of the UCL Regulations 2015-18 Cycle, 2017/18 Season (UCL Regulations). It preserves the structure of the Original Rule, making admission to the UEFA club competitions conditional upon fulfilment of three specific criteria. In terms of substance, however, the Current Rule differs in two important aspects. First, unlike the Original Rule which outlawed ownership, personal and other links only between clubs participating in the same UEFA club competition, the Current Rule extends this prohibition to clubs participating both in the UCL and the UEFA Europe League. Second, an individual or legal entity is now deemed to have control over a club not only if he/she/it (i) holds a majority of the shareholders' voting rights; (ii) is authorized to appoint or remove a majority of the members of the administrative, management or supervisory body; or (iii) is a shareholder and single-handedly controls a majority of the shareholders' voting rights, but also if he/she/it (iv) is able to exercise by any means a decisive influence in the decision-making of the club.[4] The purpose of this latter change is to address situations where an individual or legal entity falls short of having de jure control over a club, but nevertheless remains able to exercise such an influence that may, if exercised in more than one club, jeopardize the integrity of the UEFA club competitions. As will be discussed in the next section, the concept of decisive influence played a pivotal role in the Red Bull case.

Furthermore, the club coefficient no longer serves as a principal criterion in determining which of the two or more commonly owned clubs should participate in a UEFA club competition. Under the Current Rule, the club which qualifies on sporting merit for the more prestigious UEFA club competition is to be favoured.[5] If two or more commonly owned clubs qualify for the same UEFA club competition, then the club which was best-ranked in its domestic championship should be admitted.[6]

Proceedings before the CFCB

On 15 May 2017, soon after RB Salzburg and RB Leipzig had both secured their place in the 2017/18 UCL, the UEFA General Secretary dispatched a letter to the CFCB, expressing his concern that the clubs might not fulfil the criteria enshrined in the Current Rule. The subsequent investigation conducted by the CFCB Investigatory Chamber relied to a great extent on compliance reports prepared by independent auditors. On 26 May 2017, the CFCB Chief Investigator referred the case to the CFCB Adjudicatory Chamber, concluding that the clubs had failed to satisfy the criteria set out in the Current Rule and, as a result, only RB Salzburg should be admitted to the 2017/18 UCL.[7] In particular, the CFCB Chief Investigator suggested that Red Bull exercised decisive influence in the decision-making of both RB Salzburg and RB Leipzig, and identified several ways in which this influence manifested itself. For instance, the CFCB Chief Investigator drew attention to the presence of certain individuals allegedly linked to Red Bull in the decision-making bodies of both clubs or an unusually high level of income received by the clubs from Red Bull via sponsorship agreements.[8]

In its decision handed down on 16 June 2017, the CFCB Adjudicatory Chamber paid attention mainly to the changes made by RB Salzburg as part of the club's disengagement process from Red Bull. As noted above, Red Bull ceased to have the right to appoint and remove the board members of FC Red Bull Salzburg e.V. in 2015, when the association's statutes were amended accordingly. With this in mind, the CFCB Adjudicatory Chamber had to examine whether Red Bull was not able to exercise decisive influence in the decision-making of RB Salzburg (and RB Leipzig) by any other means.

The CFCB Adjudicatory Chamber was confronted with an onerous task, in particular because the UCL Regulations do not specify when an individual or legal entity is deemed to have decisive influence in the decision-making of a club. Nor do these regulations clarify how such a level of influence could be attained. Having examined the wording and purpose of the Current Rule, the CFCB Adjudicatory Chamber asserted that ''the benchmark for establishing decisive influence is a high one'',[9] finding support for its conclusion in the EU Merger Regulation.[10] For the avoidance of doubt, the Chamber further noted that the concept of decisive influence is not to be confused with that of significant influence which features in the UEFA Club Licensing and Financial Fair Play Regulations, Edition 2015.[11]

In determining whether Red Bull was indeed capable of exercising decisive influence in the decision-making of both clubs, the CFCB Adjudicatory Chamber observed from the aforementioned compliance reports that RB Salzburg had removed certain individuals allegedly linked to Red Bull from the club's decision-making bodies and terminated certain loan agreements entered into with the beverage company.[12] With the aim of refuting the CFCB Chief Investigator's allegations, RB Salzburg presented additional documentary evidence. According to the CFCB Adjudicatory Chamber, it followed from such evidence, inter alia, that Red Bull had reduced the amount of sponsorship money paid to the Austrian club or that a cooperation agreement between the two clubs had been terminated.[13] This evidence alleviated the CFCB Chief Investigator's concerns to such an extent that he eventually decided to withdraw his objection to the admission of RB Salzburg and RB Leipzig to the 2017/18 UCL.[14] Consequently, the CFCB Adjudicatory Chamber held that, at the time of its decision, Red Bull's relationship with RB Salzburg resembled ''only a standard sponsorship relationship''.[15] Having concluded that Red Bull did not have decisive influence in the decision-making of RB Salzburg, there was no need for the Chamber to consider Red Bull's relationship with RB Leipzig.[16]

Furthermore, the CFCB Adjudicatory Chamber verified whether one of the clubs did not exercise decisive influence over the other. In this regard, the Chamber referred to the cooperation agreement and the increased transfer activity between the clubs. Nonetheless, the Chamber eventually stated that there was insufficient evidence to arrive at the conclusion that RB Salzburg exercised decisive influence over RB Leipzig or vice versa.[17]

 

Further implications and concluding remarks

Rules aimed at ensuring the integrity of club competitions also exist at the national level. In England, the Rules of the Premier League stipulate, inter alia, that a person[18] – be it either natural person, legal entity, firm or unincorporated association – may not (i) be involved in or have any power to determine or influence the management or administration of more than one club participating either in the Premier League or the English Football League;[19] and (ii) hold or acquire any significant interest in more than one club participating in the Premier League. A person is deemed to have acquired significant interest in a club if he/she/it holds 10 per cent or more of the shareholders' voting rights.[20] In Spain, an individual or legal entity may not hold 5 per cent or more of the shareholders' voting rights in more than one club participating in a professional competition at the state level.[21]

It follows that both in England and Spain, the pertinent regulations set a relatively low threshold of the shareholders' voting rights that an individual or legal entity may not exceed in more than one club participating in the same domestic club competition. Moving back to UEFA, the Current Rule sets the relevant threshold at 50 per cent (majority of the shareholders' voting rights), but complements it with the 'catch-all' notion of decisive influence.

I believe that the CFCB Adjudicatory Chamber may have missed a golden opportunity in the Red Bull case to clarify further the rather vague concept of decisive influence. Unfortunately, the Chamber limited itself to stating that ''the benchmark for establishing decisive influence is a high one'',[22] without providing any concrete examples of how such a level of influence could be attained or manifested in practice.[23] The concept of decisive influence therefore remains shrouded in legal uncertainty. Moreover, in order to avoid speculations, the Chamber could have provided more details about the changes made by RB Salzburg. For instance, it could have specified which individuals allegedly linked to Red Bull were removed from the club's decision-making bodies or how the amount of sponsorship money paid to the club was reduced. Such details become particularly important if the concept of decisive influence plays a central role, because in this context the general public will not be able to access most of the relevant information via commercial registers. In contrast, this will not be the case with legal systems in England or Spain which employ a threshold of the shareholders' voting rights as a key criterion. Thus, if UEFA fails to provide such details (subject to confidentiality rules) in its decisions, its credibility might suffer.

Despite the fact that this post has identified certain flaws of the concept of decisive influence, I do not believe that a modification of the Current Rule should be a matter of urgency. As suggested above, a well-reasoned decision may foster UEFA's credibility and help reduce the legal uncertainty emanating from the concept of decisive influence. Bearing in mind the recent revitalization of multi-club ownership in European football, UEFA might soon get another opportunity to deliver such decision.


[1]   It should be noted that in addition to FC Red Bull Salzburg and RasenBallsport Leipzig, Red Bull also owns the U.S. club New York Red Bulls and the Brazilian club Red Bull Brasil.

[2]   It was often referred to as SV Austria Salzburg, a name that was given to the club at its foundation in 1933.

[3]   In fact, due to the rules prohibiting clubs to be named after their sponsors, the abbreviation 'RB' does not officially stand for Red Bull, but rather for RasenBallsport which can be roughly translated as 'lawn ball sports'.

[4]   UCL Regulations, Article 5.01(c).

[5]   Ibid. Article 5.02(a).

[6]   Ibid. Article 5.02(b).

[7]   As the Austrian club finished first in its domestic championship (whilst RB Leipzig finished second).

[8]   CFCB Adjudicatory Chamber AC-01/2017 RasenBallsport Leipzig GmbH and FC Red Bull Salzburg GmbH, Decision of 16 June 2017, para. 11.

[9]   Ibid. para. 41.

[10] Council Regulation (EC) No 139/2004 of 20 January 2004 on the control of concentrations between undertakings, Article 3(2). See also Commission Consolidated Jurisdictional Notice under Council Regulation (EC) No 139/2004 on the control of concentrations between undertakings.

[11] CFCB Adjudicatory Chamber decision (n 8) para. 40.

[12] Ibid. para. 50.

[13] Ibid. para. 51.        

[14] Ibid. para. 52.

[15] Ibid. para. 55.

[16] Ibid. para. 57.

[17] Ibid. para. 58.

[18] Rules of the Premier League to be found in the Premier League Handbook, Season 2017/18, Rule A.1.122.

[19] Ibid. Rule F.1.2. This provision in essence corresponds to Article 5.01(b) of the UCL Regulations.

[20] Rules of the Premier League, Rule F.1.3.

[21] Royal Decree No 1251/1999 on Sports Limited Liability Companies, Article 17(1) and (2). Professional football competitions at the state level include only La Liga and Segunda División A.

[22] See CFCB Adjudicatory Chamber decision (n 8) para. 41.

[23] Such examples could only be inferred from the changes made by RB Salzburg.

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